ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -As incomes rise, for example, people tend to consume more fresh fruit but less canned fruit. A good for which demand increases when income increases is called a normal good. A good for which demand decreases when income increases is called an inferior good.

Detailed explanation-2: -Inferior goods are goods for which demand declines as consumers’ real incomes rise, or rises as incomes fall.

Detailed explanation-3: -In the case of normal goods, income and demand are directly related, meaning that an increase in income will cause demand to rise and a decrease in income causes demand to fall.

Detailed explanation-4: -For most goods, called normal goods, if consumer incomes increase, demand will increase and vice versa. So if incomes increase, the demand curve for restaurant meals, and cars, and boats, will shift to the right. At the same prices people will buy more.

Detailed explanation-5: -For most goods, there is a positive (direct) relationship between a consumer’s income and the amount of the good that one is willing and able to buy. In other words, for these goods when income rises the demand for the product will increase; when income falls, the demand for the product will decrease.