ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -A Giffen good is typically an inferior product that does not have easily available substitutes. They are quite rare, to the extent that there is some debate about their actual existence. So fall in the price of such good like Bajra will also reduce its demand as income effect dominates the substitution effect.

Detailed explanation-2: -Inferior goods are the goods whose demand falls when consumer’s real income rises and whose demand rises when consumer’s real income falls. Hence, when the price of the inferior goods falls, the quantity demanded for them decreases.

Detailed explanation-3: -Hence peanuts and bajra become inferior goods at a higher level of income.

Detailed explanation-4: -An increase in the inferior good’s price means that consumers will want to purchase other substitute goods instead but will also want to consume less of any other substitute normal goods because of their lower real income.

Detailed explanation-5: -Inferior Goods Demand Curve That means higher the price, lower the demand. It determines the law of demand i.e. as the price increases, demand decreases keeping all other things equal.