Normal Good

Published Jan 10, 2023

Definition of Normal Good

A normal good is a good for which, all other things equal, an increase in income leads to an increase in demand and vice versa. That means when people earn more money, they buy more of that good and when they earn less, they buy less of it. Hence, normal goods are considered to be the opposite of inferior goods.

Example

A common example of a normal good is organic food. To illustrate this, meet Jane, a young professional. Jane lives in the United States, has a regular income, and is able to afford a well-balanced, healthy diet. That means she often buys organic food even though it is more expensive because it is of higher quality. Thus, Jane’s demand for organic food is fairly high.

However, once Jane gets a promotion and her income increases substantially, she can afford to buy even more organic food. As a result, her demand for organic food increases even more as her income rises.

Similar examples of normal goods include things like meat, takeout food, designer clothes, jewelry, etc. In fact, most goods that exist are normal goods, hence the name.

Why Normal Goods Matters

Simply put, normal goods are the opposite of inferior goods. In most cases, they are more expensive substitutes for cheaper goods or services. Thus, they are closely related to the socio-economic status of their consumers. That means they become more relevant for people in higher-income brackets.

Despite that, however, it is important to note that the term normal good relates to the demand patterns for a good and not necessarily its quality. Therefore, the reason why the demand for normal goods increases as income rises does not usually have anything to do with the quality of the product itself but with other aspects of consumer behavior.