Question

In the following Question, read the statements and choose the correct alternative among those given below:

Statement 1: Income effect is negative in case of inferior goods.

Statement 2: In case of inferior goods, fall in income leads to decrease in demand for the good.

विकल्प

• Both the Statements are true.

• Both the Statements are false.

• Statement 1 is true and Statement 2 is false.

• Statement 2 is true and Statement 1 is false.

Answer 1

Statement 1 is true and Statement 2 is false.

Explanation:

Demand for an inferior good moves inversely with income, so its income effect is negative. Statement 2 is false: a fall in income generally increases demand for an inferior good.