Definition
- Normal good
- A normal good is one for which the quantity demanded rises as income rises and falls as income falls, so its income elasticity is positive.
Example
Can you think of an example of normal good?
Incomes rise 10 per cent and the number of new cars bought rises 5 per cent: an income elasticity of +0.5, positive, so new cars are a normal good.
Test yourself
Can you name the six types of good you can label from income and cross elasticity?