A Level Economics AQA Practice Exam

How does an increase in income typically affect the demand for a normal good?

1. Demand increases

2. Demand decreases

3. Demand remains unchanged

4. Demand fluctuates unpredictably

The correct answer is: Demand increases

An increase in income typically leads to an increase in the demand for a normal good. Normal goods are defined as those goods for which demand rises as consumer income increases. This relationship occurs because as individuals have more disposable income, they are more likely to purchase more of these goods, enhancing their overall consumption and standard of living. For example, if a person's income increases, they may choose to buy more organic food, luxury clothing, or dining out more frequently, all of which are considered normal goods. The fundamental economic principle behind this phenomenon is rooted in consumer behavior; as people feel more financially secure, they are inclined to spend more on goods that improve their quality of life. The increase in demand is generally depicted in demand curves that shift to the right in response to higher income levels, indicating that at every price level, more of the good is demanded than before. This positive correlation between income and the demand for normal goods is a significant concept in understanding market dynamics and consumer choice.