Real Estate Council of Alberta Fundamentals Practice Exam

What outcome can be expected from an increase in consumer income?

1. Decrease in demand for normal goods

2. Increase in demand for inferior goods

3. Increase in demand for normal goods

4. No impact on demand

The correct answer is: Increase in demand for normal goods

When consumer income increases, one can expect an increase in the demand for normal goods. Normal goods are those for which demand rises as income increases. This happens because consumers feel more financially capable and are likely to purchase more goods and services that they perceive as higher quality or more desirable. This increased ability to spend allows them to choose products that they may have previously considered too expensive when their income was lower. Conversely, inferior goods—goods for which demand declines as income increases—would experience reduced demand as consumers opt for normal goods that better meet their needs and preferences. Therefore, an increase in consumer income typically leads to higher demand for items that fall into the category of normal goods rather than a decrease or stagnation in demand.