ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Inferior goods have a negative income elasticity of demand; as consumers’ income rises, they buy fewer inferior goods. A typical example of such a type of product is margarine, which is much cheaper than butter.

Detailed explanation-2: -Inferior goods tend to have a negative income elasticity of demand since income increases for consumers; they purchase lesser products. Vegetable oil is a common example of this type of food and is much cheaper than butter.

Detailed explanation-3: -Low income elasticity of demand: real income is less than the increase in quantity demanded. Zero income elasticity of demand: quantity demanded remains unchanged despite a change in real income. Negative income elasticity of demand: There is an increase in real income but a decrease in the quantity of goods demanded.

Detailed explanation-4: -Similarly, if the income decreases, the consumer cannot curtail his/her consumption of such a good with a greater degree. A smaller proportionate change follows every proportionate change in income. Hence, the income elasticity of staple foods such as wheat is observed to be between zero and one.