As consumers’ income rises, the demand for branded packaged foods, eating out at restaurants, and premium clothing increases proportionately. The income elasticity of demand for such goods is positive. Therefore, these goods are classified as ________.

Normal goods are products for which demand has a direct relationship with consumer income. When income rises, the quantity demanded for these goods also increases. These goods have a positive income elasticity of demand i.e. 𝑌𝐸𝐷 > 0. This confirms that as consumers earn more, they allocate more funds toward these items. Examples include branded clothing, restaurant meals, and higher-quality food items, as these are seen as more desirable than their generic or basic alternatives.  Note - Luxury goods (also known as superior goods) are a specific type of normal good defined by a high responsiveness to changes in income. The income elasticity of demand (YED) for luxury goods is also positive but greater than 1. This means there will be more-than-proportionate increase in demand for these when income rises. The other normal goods are necessity goods. Here the income elasticity is inelastic 0 < YED < 1 i.e. the demand increases slower than the income growth. Examples - Basic groceries, water, electricity Inferior goods have a negative income elasticity. Demand for these goods (like instant noodles or public transport) actually decreases as income rises because consumers switch to better quality options. Giffen goods are a specific type of inferior good where demand increases as the price rises due to a lack of substitutes. They are defined by price-demand relationships rather than just income increases.