ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -The determination of a good as inferior depends on the income level we examine. Give an example of a good that is likely to be inferior in the country that you come from. Explain why you think this good is likely to be inferior. Baked beans are an example of an inferior good in the UK.

Detailed explanation-2: -Typical examples of inferior goods include “store-brand” grocery products, instant noodles, and certain canned or frozen foods. Although some people have a specific preference for these items, most buyers would prefer buying more expensive alternatives if they had the income to do so.

Detailed explanation-3: -The income elasticity of demand for baked beans is-0.4.

Detailed explanation-4: -Answer: All Giffen goods are inferior. For a Giffen good, the income effect must be negative; that is a fall in income increases demand. This effect must, furthermore, be strong enough to outweigh the substitution effect whereby higher prices induce consumers to switch away from this good.