Change in Real Disposable Income

 

Goods can be categorised as normal goods and inferior goods

 

If the good is a normal good, an increase in real disposable income will lead to more being demanded at each price (the demand curve will shift to the right) and a decrease in disposable income will lead to less being demanded at each price (the demand curve will shift to the left).

 

If the good is an inferior good, and increase in real disposable income will lead to less being demanded at each price (the demand curve will shift to the left) and a decrease in disposable income will lead to more being demanded at each price (the demand curve will shift to the right).