Question

List two goods and two services for which demand increases when income goes up. What types of goods are these?

a) Normal goods
b) Inferior goods
c) Luxury goods
d) Giffen goods

Answer 1

When income increases, demand for normal goods like luxury cars and fine jewelry, as well as services such as European vacations, also increases. Inferior goods such as used cars and generic brand groceries see a decrease in demand as income goes up.

Step-by-step explanation:

Two goods for which demand increases when income goes up are luxury cars and fine jewelry. An example of two services would be vacations in Europe and high-end hotel accommodation. These goods and services are considered normal goods, as their demand rises with an increase in income.

Alternatively, as income rises, people tend to decrease their consumption of inferior goods like used cars or generic brand groceries, as these goods are typically substituted with higher-quality options when an individual's purchasing power increases.