Question

Which of the following is / are characteristics of a Normal good?
1. The demand falls with increase in prices of the good
2. The demand decreases with increase in income
3. The demand increases with increase in income
Which of the above statements are correct

• A. 1 only
• B. 1 and 2
• C. 1 and 3
• D. 1,2 and 3

Answer 1

The correct option is C 1 and 3

A normal good is a good that experiences an increase in its demand due to a rise in consumers' income. In other words, if there's an increase in wages, demand for normal goods increases while conversely, wage declines or layoffs lead to a reduction in demand. In the case of normal goods, income and demand are directly related, meaning that an increase in income will cause demand to rise and a decrease in income causes demand to fall.

For example, for most people, consumer durables, technology products and leisure services are normal goods.As per Law of Demand, If the price goes up, the quantity demanded goes down. If the price decreases, quantity demanded increases.