What are Normal Goods?
Normal goods are a type of goods whose demand shows a direct relationship with a consumer’s income. This means that the demand for normal goods increases with an increase in the consumer’s income or expansion of the economy (which generally will increase the income of the population).
Normal goods demonstrate a higher income elasticity of demand than inferior goods. The former shows an elasticity between zero to one, while the latter shows a negative income elasticity of demand.
Normal Goods and Consumer Behavior
Demand for normal goods is determined by patterns in the behavior of consumers. Larger income leads to changes in consumers’ behavior. As income increases, consumers may be able to afford goods that were not previously available to them.
In such a case, the demand for the goods increases due to their attractiveness to consumers. It may be explained by the higher quality of the goods, higher functionality, or more prestigious socio-economic value (think about many luxury goods).
Normal Goods vs. Inferior Goods
Normal goods are the opposite of inferior goods, whose demand decreases with an increase in the consumer’s income or expansion of the economy (i.e., there is an inverse relationship between the demand and the consumer’s income).
Nevertheless, the distinction between normal and inferior goods is not homogeneous among different countries and geographic regions. One good can be normal in one country, while in another country, it is considered inferior. Several factors can influence the classification.
In addition, as time goes by, some of the normal goods may become inferior and vice versa. For example, railway travel. During the time when it was new, railway transport was considered as a normal (even luxury) good because it was the fastest way of traveling. Nowadays, in many countries, railway transport is an inferior good because it is much slower but more affordable than airplanes.
Examples of Normal Goods
There are many examples of normal goods. However, goods that are considered normal in one region may be considered inferior in another region. The variation may be caused by local traditions, socio-economic, or geographic characteristics.
Common examples include:
- Organic food
- Fine dining
- Gym memberships
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