Although some of the statements below are true of both normal goods and inferior goods, only one of the statements defines a normal good.Which one?
A)Normal goods are those for which the income effect is positive.
B)Normal goods are those for which the income effect is negative.
C)Normal goods are those for which the substitution effect overrides the income effect.
D)Normal goods are those for which the income effect overrides the substitution effect.
E)Normal goods are those for which demand increases when price increases.

Question

Quizplus · Accepted Answer

A normal good is one for which the income effect is positive, meaning that as a consumer's income increases, they will buy more of the good. This is in contrast to an inferior good, for which the income effect is negative and an increase in income leads to a decrease in demand for the good. The other statements do not definitively define a normal good.

Although Some of the Statements Below Are True of Both