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Explain the effect of the following on demand for a good: (i) Fall in Income for Normal Goods. (ii) Fall in Income for Inferior Goods. |
Answer» Solution :(i) Fal in Income for Normal Goods:  (a) For normal commodity, with a fall in income, the DEMAND of the commodity also falls and vice -versa. (b)SHORTLY, direct relationship exists between income of a consumer and demand of normal commodity. (C) DUE to fall in Income of a consumer (say from Rs 6000to Rs 5000), the demand of normal goods shiftsleftwards from DD to `D_(1)D_(1)` asshown in figure above. (ii) Fall in Income for Inferior Goods:  For inferior goods, with a fall in income, the demand of the commodity rises and vice-versa. (b) Shortly, inverse relationship exists between income of a consumer and demand of inferior goods, |
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