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shift in the position of the demand curve
, not a 
movement along it, since it is 
not
stimulated by a change in price. 
Goods whose income elasticity of demand is positive are said to be 
normal goods
, meaning that demand 
for them will rise when household income rises. If income elasticity is 
negative
, the commodity is called 
an 
inferior good
 
since demand for it falls as income rises.
Inferiority in this sense is an observable fact about the consumer's demand preferences, rather than a 
statement about the quality of the good itself.
Inter-city bus travel is an example of an inferior good. Bus travel is cheaper than air or rail travel, but 
takes longer. When consumers have limited income, they are prepared to forgo the increased time taken 
to travel in return for the cheaper cost. However, as their income increases, they will choose the more 
rapid modes of transport over the slower, albeit cheaper, bus travel. Therefore demand for bus travel will 
fall as income rises.
Income elasticity of demand can be summarised as follows. 
Elasticity 
Value 
Type of good 
Example 
Negative 
–ve 
Inferior 
Inter-city bus travel 
Inelastic 
0 – 1 
Necessity 
Basic food stuffs 
Elastic 
> 1 
Luxury 
Yachts, sports cars 
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CHAPTER 4
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MICROECONOMIC FACTORS 
 
99 
For most commodities, an increase in income will increase demand. The exact effect on demand will 
depend on the type of product. For example, the demand for some products like bread will not increase 
much as= income rises. Therefore, bread has a low income elasticity of demand. In contrast, the 
demand for luxuries increases rapidly as income rises and luxury goods therefore have a high income 
elasticity of demand.
Income
Quantity demanded
Normal
good
Inferior
good
Figure 3 Demand curves for normal and inferior goods