What does a positive income elasticity of demand indicate for normal goods?

• A. Demand decreases as consumer income increases
• B. Demand remains constant with changes in income
• C. Demand increases as consumer income increases
• D. Demand is unrelated to changes in consumer income

Answer: (C)

A positive income elasticity of demand for normal goods signifies that as consumer income rises, the quantity demanded for those goods also increases. This relationship indicates that normal goods are considered desirable by consumers; they typically purchase more of these goods when they have greater financial means.

For instance, if a consumer's income increases, they may choose to buy more organic foods or luxury items, which are classified as normal goods. The elasticity quantifies how much the demand for these products will change in response to income changes, helping economists and businesses understand purchasing behavior in relation to economic conditions. This behavior reflects the direct correlation between income levels and demand for normal goods, thereby confirming that option C accurately describes this relationship.