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Question

In the above diagram, if curve IC represents income - consumption curve, then it means that :

The correct answer is
Only (A) is an inferior good.

To solve this question, we need to understand the concept of an income-consumption curve and how it relates to normal and inferior goods.

The Income-Consumption Curve (ICC) shows the combination of goods that a consumer would buy when their income changes, with prices held constant. The shape of the ICC can help identify whether a good is normal or inferior:

  • Normal Goods: As income increases, the consumption of normal goods increases. Therefore, on an ICC graph, a normal good would show a positive slope (outward from the origin).
  • Inferior Goods: As income increases, the consumption of inferior goods decreases. Thus, on an ICC graph, an inferior good may have a negatively sloping curve (backward bending curve).

In the given diagram, the ICC curve starts upward and then bends back, indicating that as income increases, the consumption of Good A decreases at some point, showing the characteristic of an inferior good.

Conclusion: Based on the shape of the ICC, only Good A becomes an inferior good at higher levels of income. Thus, the correct answer is: Only (A) is an inferior good.

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Important Questions from Demand analysis

  1. If the gross elasticity of demand is negative, the two products in consideration are __________ products.
  2. For a linear demand curve, which of the following is true ?
  3. A consumer spends ₹ 240 when the price of the commodity is ₹ 15 and ₹ 300 when the price rises to ₹ 20. The elasticity of demand is :
  4. Which one of the following demands states consumers are adequately buying all the products put into the marketplace?

  5. Given below are two statements. one labelled as Assertion (A) and the other labelled as Reason (R).

    Assertion (A): Auto companies and other consumer goods companies offer cash rebates to encourage purchase of the manufacturer's products within a specified period 

    Reason (R): The same product is priced differently at different times 

    In the context of the two statements above related to pricing strategy, which one of the following options is correct? 

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