A product whose demand increases when income increases and decreases when income falls is known as which type of good?

A product whose demand increases when income increases and decreases when income falls is known as which type of good?

• A. Normal Goods
• B. Inferior Goods
• C. Substitutes
• D. Complements

Answer: (A)

When a good’s demand grows as people’s incomes rise, it’s a normal good. This reflects a positive income elasticity of demand: with more money, people buy more of these goods, and with less money, they buy less. For example, dining out or branded clothing often fits this pattern. The other terms describe how one good relates to another, not how demand changes with income: substitutes are goods that replace each other, and complements are goods often used together. So the product described is a normal good.

When a good’s demand grows as people’s incomes rise, it’s a normal good. This reflects a positive income elasticity of demand: with more money, people buy more of these goods, and with less money, they buy less. For example, dining out or branded clothing often fits this pattern. The other terms describe how one good relates to another, not how demand changes with income: substitutes are goods that replace each other, and complements are goods often used together. So the product described is a normal good.