Normal good

When there is an increase in a person's income, for example due to a wage rise, a good for which the demand rises due to the wage increase, is referred as a normal good.

On the other hand, with inferior or normal goods, people spend a lesser proportion of their income.

This depends on a lot of factors such as geographical locations, socio economic conditions in a country, local traditions and many more.

The demand for normal goods are determined by many types of consumer behaviour.

Economic theory assumes that a good always provides marginal utility (holding everything else equal).

A caveat to the table above is that not all goods are strictly normal or inferior across all income levels.

Another potential caveat is brought up by "The Notion of Inferior Good in the Public Economy" by Professor Jurion of University of Liège (published 1978).

Consumption of many public goods will decrease when a rational consumer's income rises, due to replacement by private goods, e.g. building a private garden to replace use of public parks.

But when effective congestion costs to a consumer rises with the consumer's income, even a normal good with a low income elasticity of demand (independent of the congestion costs associated with the non-excludable nature of the good) will exhibit the same effect.

This makes it difficult to distinguish inferior public goods from normal ones.

Graph of a normal good
Example of a normal good: As income increases from B1 to B3 , the outward movement of utility curve I dictates that the quantity of good X 1 increases in tandem. Therefore, X 1 is a normal good. Put another way, the positively sloped income consumption curve demonstrates that X 1 is normal. The Engel curve of X 1 would also be positively sloped.
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.
Engels curves showing income elasticity of demand (YED) of normal goods (comprising luxury (red) and necessity goods (yellow)), perfectly inelastic (green) and inferior goods (blue)