Final answer:
An increase in customer income causes the demand curve for normal goods to shift to the right, signaling an increase in demand, whereas for inferior goods, the demand curve shifts to the left, indicating a decrease in demand. The magnitude of these shifts depends on the income elasticity of demand for the particular good.
Step-by-step explanation:
Customer income significantly impacts the demand for normal goods. With an increase in income, the demand curve for normal goods shifts to the right, indicating a greater quantity demanded at every price. This is because normal goods represent increased quality or prestige, and higher income enables consumers to purchase more of these products, such as luxury cars, European vacations, and fine jewelry.
Conversely, for inferior goods, an increase in income results in a lower demand, shifting the demand curve to the left. Inferior goods are typically those consumers will buy less of as they become wealthier, opting instead for higher-quality alternatives. Examples include generic brands and used cars.
The degree to which the demand curve shifts for either type of good depends on the income elasticity of demand. A higher income elasticity indicates a more substantial shift for normal goods, whereas a negative income elasticity indicates a significant shift for inferior goods.