Editing Normal good (section)

== Analysis ==
There is a positive correlation between the income and demand for normal goods, that is, the changes income and demand for normal goods moves in the same direction.  That is to say, that normal goods have an elastic relationship for the demand of a good with the income of the person consuming the good.

In economics, the concept of elasticity, and specifically income elasticity of demand is key to explain the concept of normal goods. Income elasticity of demand measures the magnitude of the change in demand for a good in response to a change in consumer income. the income elasticity of demand is calculated using the following formula,

Income elasticity of demand= % change in quantity demanded / % change in consumer income.

In mathematical terms, the formula can be written as follows:

<math>\xi_i= \frac{\Delta Q_ / Q}{\Delta Y / Y}</math>, where <math>Q</math> is the original quantity demanded and <math>Y</math> is the original income, before any change.

A good is classified as a normal good when the income elasticity of demand is greater than zero and has a value less than one. If we look into a simple hypothetical example, the demand for apples increases by 10% for a 30% increase in income, then the income elasticity for apples would be 0.33 and hence apples are considered to be a normal good. Other types of goods like luxury and inferior goods are also classified using the income elasticity of demand. The income elasticity of demand for luxury goods will have a value of greater than one and inferior goods will have a value of less than one. Luxury goods  also have a positive correlation of demand and income, but with luxury goods, a greater proportion of peoples income are spent on a luxury item, for example, a sports car. On the other hand, with inferior or normal goods, people spend a lesser proportion of their income. Practically, a higher income group of people spend more on luxury items and a lower income group of people spend more of their income on inferior or normal goods.

However, the classification of normal and luxury goods vary from person to person. A good that is considered to be a normal good to a lot of people maybe considered to be luxury good to someone. This depends on a lot of factors such as geographical locations, socio economic conditions in a country, local traditions and many more.
[[File:Income consumption.jpg|thumb|472x472px|The graph shows the change in demand for both normal goods and luxury goods due to a change in income. When the income rises from 500 to 700, the quantity demanded for normal goods rises from 800 to 900.]]

=== Normal goods and consumer behaviour ===
The demand for normal goods are determined by many types of [[consumer behaviour]]. A rise in income leads to a change in consumer behaviour. When income increases, consumers are able to afford goods that they could not consume before an income rise. The purchasing power of consumers increases. In this situation, the demand rises because of the attractiveness to consumers. The goods are attractive to the consumers maybe because they are high in quality and functionality and also the goods may help to maintain a certain socio economic prestige. Individual consumers have unique behavioural characteristics and  they have their preferences accordingly.

According to economic theory, there must be at least one normal good in any given bundle of goods (i.e. not all goods can be inferior). Economic theory assumes that a [[Good (economics)|good]] always provides [[marginal utility]] (holding everything else equal). Therefore, if consumption of all goods decrease when income increases, the resulting consumption combination would fall short of the new budget constraint frontier.<ref name=":0">{{Cite book|last=Perloff|first= Jeffrey M. | title=Microeconomics| year=2015 | isbn=978-0133456912|edition=Seventh|location=Boston|oclc=876140973}}{{page needed|date=April 2019}}</ref> This would violate the economic rationality assumption.

When the price of a normal good is zero, the demand is infinite.{{Citation needed|date=November 2024}}