Which statement describes a normal good?

Which statement describes a normal good?

• A. A good for which demand rises as consumer income rises.
• B. A good for which demand falls as consumer income rises.
• C. A good whose demand is unaffected by income.
• D. A good that is a substitute for another.

Answer: (A)

Demand for a normal good increases as income rises. When people have more money, they can buy more of these goods, so the quantity demanded goes up with income (income elasticity > 0). This contrasts with inferior goods, where demand falls as income rises, and neutral goods, where demand doesn’t change with income. Substitutes involve how the demand for one good responds to the price of another, not to income. So the statement that demand rises with income best describes a normal good.

Demand for a normal good increases as income rises. When people have more money, they can buy more of these goods, so the quantity demanded goes up with income (income elasticity > 0). This contrasts with inferior goods, where demand falls as income rises, and neutral goods, where demand doesn’t change with income. Substitutes involve how the demand for one good responds to the price of another, not to income. So the statement that demand rises with income best describes a normal good.