Inferior Goods Defined
Inferior goods are products whose demand decreases as consumers' income increases. This is the opposite of normal goods, where demand rises with income.
Income Effect Analysis
The income effect describes how changes in purchasing power (real income) affect consumption. When a consumer's income rises, they tend to buy less of an inferior good and switch to better alternatives.
- Increase in Income leads to Decrease in Consumption of inferior goods.
- This relationship signifies a Negative Income Effect.
Conclusion on Inferior Goods
Therefore, in consumption patterns, inferior goods are characterized by a negative income effect.
Important Questions from Consumer behaviour
In relation to theory of consumers behaviour, which of the following statements is INCORRECT?
The concept of consumer surplus was propounded by __________.
Goods whose demand varies inversely with income are called ____ goods.
_____ have an income elasticity of demand of between 0 and +1.
According to ____ theory, a consumer will continue to buy such products that will deliver him the most utility or maximum satisfaction at relative prices.
