 |
Definition of 'Normal Good'
An economic term used to describe the quantity demanded for a particular good or service as a result of a change in the given level of income. A normal good is one that experiences an increase in demand as the real income of an individual or economy increases.
Another way to define a normal good is by calculating its income elasticity of demand. If this coefficient is positive and lower than 1, the good is considered to be a normal good.
|
 |
Investopedia explains 'Normal Good'
In most circumstances, as the income of an economy increases, there is an increase in the demand for goods and services. One example might be luxury cars; as the income level increases, more people buy or demand these cars.
However, when income rises, demand for some goods and services may be negatively affected. For example, as the income level increases, fewer people might use the public transportation system. In this case, the bus or train would be considered an inferior good or service because its demand has gone down.
|
-
Learn economics principles such as the relationship of supply and demand, elasticity, utility, and more!
Read More »
-
Beer is a complex beverage shaped by supply and demand, production and distribution, with regulation thrown in for that extra kick.
Read More »
-
From unemployment and inflation to government policy, learn what macroeconomics measures and how it affects everyone.
Read More »
-
|
|
