Assume you consume only pasta and steak. As exogenous income rises, you consume more steak, and less pasta. In this case, steak is a normal good, while pasta is an inferior good.
def. The Income effect is a change in consumption only due to income
Absolute changes in consumption define normal/quasi-linear/inferior goods
↑ — Normal Good
Income↑…consumption same — Quasi-linear Good Income↑…consumption↓ — Inferior Good
On the other hand, relative changes in consumption define luxury/homothetic/necessary goods.
+% Income > +% consumption — **Luxury Good
+%** Income = +% consumption — **Homothetic Good
+%** Income < +% consumption — **Necessary Good**
