ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Answer a. is incorrect as an increase in consumer income will decrease the demand for inferior goods. An inferior good is a good that consumers purchase less when their income rises and more when their incomes fall.

Detailed explanation-2: -In economics, the demand for inferior goods decreases as income increases or the economy improves. When this happens, consumers will be more willing to spend on more costly substitutes. Some of the reasons behind this shift may include quality or a change to a consumer’s socio-economic status.

Detailed explanation-3: -As consumers’ incomes increase, people have more money to spend. This means that demand for many goods and services will increase as consumers look to spend their extra money. They might buy upgraded versions of products they already have, eg a new car, or take an expensive holiday.

Detailed explanation-4: -In the case of inferior goods income and demand are inversely related, which means that an increase in income leads to a decrease in demand and a decrease in income leads to an increase in demand. For example, necessities like bread and rice are often inferior goods.

Detailed explanation-5: -b. If a good is an inferior good, increases in income will result in a decreasein demand while decreases in income will increase demand.