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Explain the effect of the following on demand for a good: (i) Rise in Income for Normal Goods. (ii) Rise in Income for Inferior Goods. |
Answer» Solution :(i) Rise in INCOME for Normal Goods:  (a) For normal commodity, with a rise in income, the demand of the commodity also riseand vice-versa. (B) Shortly, direct relationship of a consumer(say from Rs 5000to Rs 6000), the demand of normal goods shifts rightward from DDto`D_(1)D_(1)` as shown in above figure. . (II) Rise in Income for Inferior Goods: (ii) Rise in Income for Inferior Goods:  (a) For inferiorgoods, with a rise in income,the demand of the commodity falls and vice-versa. (b) Shortly, INVERSE relationship exists between income of a consumer and demand of inferior goods. (c ) due to rise in income of a consumer (say from Rs 5000 to Rs 6000), the demand of inferior goods shifts leftward from DD to `D_(1)D_(1)` as shown in adjacement figure: |
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