Normal Good

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Definition of a Normal Good:

A normal good is a good or service for which the demand is directly related to income, which means that if a person’s income increases, the demand for a normal good will also increase.

Detailed Explanation:

Changes in income affect the demand for most goods and services. Imagine that you receive a nice pay raise or inherit some money. Would you purchase a new car? Perhaps you would take a nice trip. Most goods are normal goods, or goods or services with demands that are directly related to income. As income increases, the demand for a product also increases, so the demand curve shifts to the right. A drop in income would result in a decrease in the demand for the good or service. In this case, the demand curve would shift to the left. Designer clothes, new cars, and dining at restaurants are examples of normal goods because households tend to purchase more of these items as their incomes increase. 

Here's a fun video explaining this concept more.

Dig Deeper With These Free Lessons:

Demand – The Consumer's Perspective
Changes In Demand – When Consumer Tastes Change
Supply and Demand – Producers and Consumers Reach Agreement
Fiscal Policy – Managing an Economy by Taxing and Spending

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