Normal Good

Whether you’re a normal person or a weirdo, everyone buys normal goods. In microeconomics, a normal good is a good whose demand rises along with more buying-power. More buying-power might come from a raise in income, from the economy doing well, or from prices going down.

In econ-speak, normal goods have a positive income elasticity of demand.

If you got a raise tomorrow, what would you buy more of? Chocolate? Video games? These are normal goods. Inferior goods are the opposite of normal goods: as buying power goes up, demand for inferior goods goes down. No more crappy coffee or canned beets—only Hoity Toity Coffee and organic beets for you with your raise.

Inferior goods have a negative income elasticity of demand.

If normal goods and inferior goods are the opposites of each other, where do luxury goods fit in?

Luxury goods are a subtype of normal goods. They’re goods where, as your buying-power increases, your demand for them increases faster than your buying-power. When your demand for a good is rising faster than your raise, you’re looking at luxury goods: Teslas, posh-as-cushions designer wear...stuff like that. Luxury goods are normal goods, because they also have a positive income elasticity of demand...they’re just extreme normal goods.