Question

A consumer consumes good ‘X’. Explain the effects of fall in the prices of related goods on the demand of ‘X’. Use diagrams showing demand for good ‘X’ on the x-axis and is price on y-axis.

Answer 1

A fall in the income of a buyer leads to an increase in demand for inferior goods because consumers prefer to buy more low-priced goods instead of expensive alternatives.

For example, when the income of a consumer falls, the demand for coarse grains may increase.

The demand curve shifts rightward from DD to D₁D₁, showing an increase in demand from OQ to OQ₁ at the same price OP.