Chapter 15: Problem 579

What is meant by the term "normal goods"?

Short Answer

Expert verified

Normal goods are goods whose demand increases with an increase in income level, keeping other factors constant. They have positive income elasticity of demand, and can be essential goods, like food, clothing, and housing, or superior goods like luxury cars and high-end electronics. Examples include groceries, clothing, and entertainment.

Step by step solution

1. Definition of Normal Goods

: Normal goods are the goods whose demand increases with an increase in income level, keeping other factors constant. In other words, as consumers' income increases, they tend to buy more of these goods.

2. Characteristics of Normal Goods

: a) Positive Income Elasticity of Demand: The income elasticity of demand for normal goods is positive, which means that as income increases, the demand for these goods also increases. b) Essential Goods: Some normal goods are essential for daily life, like food, clothing, and housing. c) Superior Goods: As income increases or consumers become more affluent, they may start buying superior normal goods, such as luxury cars or high-end electronics.

3. Examples of Normal Goods

: To better understand the concept of normal goods, let's look at a few examples: a) Groceries: As income increases, consumers typically buy more groceries and may also opt for higher-quality products. b) Clothing: With an increase in income, consumers often spend more on clothing and might choose more expensive brands and higher-quality materials. c) Entertainment: As income grows, people may spend more on entertainment, such as movies, concerts, and vacations. Remember that normal goods are those goods for which demand increases as income increases, while keeping other factors constant. This concept is important to understand consumer behavior and changes in demand patterns as income levels change.

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What is meant by the term "normal goods"?

Short Answer

Step by step solution

1. Definition of Normal Goods

2. Characteristics of Normal Goods

3. Examples of Normal Goods

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