Positive income elasticity

Normal goods are goods for which demand increases as income increases, and decreases as income decreases. This means that normal goods have a positive income elasticity of demand.

Explanation:

Normal goods are the most common type of goods that people buy. As people's income increases, their ability to purchase goods and services also increases. This leads to an increase in the demand for normal goods. On the other hand, when people's income decreases, their ability to purchase goods and services decreases, leading to a decrease in the demand for normal goods.

Income elasticity of demand

The income elasticity of demand measures the responsiveness of the quantity demanded of a good to a change in income. It is calculated by dividing the percentage change in quantity demanded by the percentage change in income.

Positive income elasticity

A positive income elasticity of demand means that as income increases, the quantity demanded of a good also increases. This is the case for normal goods. When people have more disposable income, they are more likely to spend it on normal goods, leading to an increase in demand. For example, as people's income increases, they may choose to purchase higher quality or more expensive versions of goods they already buy.

Examples of normal goods

- Clothing: As people's income increases, they may choose to buy more expensive or designer clothing.
- Cars: Higher income individuals may choose to buy luxury cars or more expensive models.
- Vacations: People with higher income may have more disposable income to spend on vacations and travel.
- Electronics: Higher income individuals may choose to buy more advanced or expensive electronic devices.

Conclusion

Normal goods have a positive income elasticity, meaning that as income increases, the demand for these goods also increases. This is because people have more disposable income to spend on normal goods. Examples of normal goods include clothing, cars, vacations, and electronics.