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Questions
If the quantity demanded of commodity X decreases as the householder's income increases. What type of a commodity is X? Give an example.
How does an increase in income affect the demand for an inferior good?
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Solution
If the quantity demanded of commodity X decreases as the householder's income increases, commodity X is an inferior good.
Inferior goods are those for which demand decreases as consumers' income increases. As people earn more, they tend to buy less of the inferior good and more of higher-quality or more expensive substitutes.
Example:
Instant Noodles: For some consumers, instant noodles might be considered an inferior good. When their income increases, they may purchase fewer instant noodles and instead buy more fresh or higher-quality food options.
