How consumers respond to a change in income depends on a variety of factors. At first, it seems natural that an increase in income would lead to an increase in the desired quantity demanded. But if you think about it for a bit, you realize that there are probably things you purchase now only because you can't afford the more expensive alternatives. If so, you will buy less of these goods as your income rises. Goods that you purchase more of as your income rises are known as normal goods. Goods that you purchase less of as your income rises are known as inferior goods.

   Normal goods are easy. They are things you'd like to consume more of, if you could afford to. Vacations, restaurant meals, recreational equipment, stereos, computers, new cars, education, insurance, and many others are normal goods for most people. As economists, we can't say which goods should be normal or inferior; we can only observe how purchase decisions change when income changes.

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