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: -Income elasticity of demand is the change in the quantity demanded of a commodity with respect to the percentage change in the income. The demand for inferior goods rises when the real income of consumers falls and vice versa. Hence, income elasticity of demand for inferior goods is negative.

Detailed explanation-3: -As we learned previously, inferior goods have an inverse relationship between income and demand, which results in a negative income elasticity of demand. On the other hand, normal goods have a positive relationship between income and demand which is reflected in a positive income elasticity of demand.

Detailed explanation-4: -Inferior goods are considered to have a negative income elasticity. The YED value for inferior goods is less than zero. For inferior goods, the demand for goods decreases when the income of the consumer increases. The decrease in demand for inferior goods is attributed to the presence of superior alternatives.

Detailed explanation-5: -2. Negative income elasticity of demand. It refers to a condition in which demand for a commodity decreases with a rise in consumer income and increases with a fall in consumer income. Inferior goods are such commodities.