ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -In economics, the demand for inferior goods decreases as income increases or the economy improves. When this happens, consumers will be more willing to spend on more costly substitutes. Some of the reasons behind this shift may include quality or a change to a consumer’s socio-economic status.

Detailed explanation-2: -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-3: -A product whose demand falls when income rises, and vice versa, is called an inferior good. In other words, when income increases, the demand curve shifts to the left.

Detailed explanation-4: -The income and substitution effects work in opposite directions for an inferior good. When an inferior good’s price decreases, the income effect reduces the quantity consumed, whilst the substitution effect increases the amount consumed.