Normal good


Normal good

In economics, normal goods are any goods for which demand increases when income increases and falls when income decreases but price remains constant, i.e. with a positive income elasticity of demand.[1][2] The term does not necessarily refer to the quality of the good.

Depending on the indifference curves, the amount of a good bought can either increase, decrease, or stay the same when income increases. In the diagram below, good Y is a normal good since the amount purchased increases from Y1 to Y2 as the budget constraint shifts from BC1 to the higher income BC2. Good X is an inferior good since the amount bought decreases from X1 to X2 as income increases.

Examples include Holidays, Cars etc.

example of a normal good and an inferior good

See also

References


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