Normal goods - Definition and Overview

In economics, normal goods are any goods for which demand increases when income increases. The term does not 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.

See also

• inferior goods
• Giffen good
• consumer theory