What typically happens to demand when consumers' incomes rise?

When consumers' incomes rise, their purchasing power increases, which typically leads to an increase in demand for normal goods. Normal goods are products whose demand rises when income increases because consumers can afford to buy more or choose higher-quality alternatives. For instance, if someone was previously buying inexpensive clothing due to limited income, a rise in income may result in them opting for more expensive, higher-quality brands.

This relationship hinges on the nature of the goods in question; normal goods are directly linked to increased consumer wealth. In contrast, inferior goods, which are typically lower-cost alternatives, may see a decrease in demand as consumers can afford to buy better-quality substitutes. Understanding this dynamic is essential in grasping how income levels influence market demand.