A family buys more of a low-quality cereal as its income rises up to Rs 10,000 a month, but buys less of it when income rises beyond that. Its income rises from Rs 12,000 to Rs 15,000, other things remaining the same. What happens to its demand curve for this cereal, and what is the cereal for the family in this range?
Answer & explanation
Correct answer: option 4
The correct answer is Option (4) → It shifts leftward; an inferior good
Beyond Rs 10,000 a month, the family buys less of the cereal as income rises. In that range, demand moves opposite to income, so the cereal is an inferior good.
A rise in income from Rs 12,000 to Rs 15,000 lies in this range. For an inferior good, a rise in income shifts the demand curve leftward. The price of the cereal has not changed, so there is no movement along the curve.
Below Rs 10,000 the same cereal behaves as a normal good: a good can be normal at some incomes and inferior at others.
NCERT (2026-27): “2.4.3 Normal and Inferior Goods … Examples of inferior goods include low quality food items like coarse cereals. A good can be a normal good for the consumer at some levels of income and an inferior good for her at other levels of income. At very low levels of income, a consumer’s demand for low quality cereals can increase with income. But, beyond a level, any increase in income of the consumer is likely to reduce her consumption of such food items as she switches to better quality cereals.” “2.4.5 Shifts in the Demand Curve … Given the prices of other goods and the preferences of a consumer, if the income increases, the demand for the good at each price changes, and hence, there is a shift in the demand curve. For normal goods, the demand curve shifts rightward and for inferior goods, the demand curve shifts leftward. …” |