Practicing Success

Target Exam

CUET

Subject

Economics

Chapter

Micro Economics: Theory of Consumer behaviour

Question:

A good that is considered to be inferior to a consumer, may be observed as normal good to the another consumer. This is due to

Options:

Quality of the consumer

Income of the consumer

Quantity of the consumer

Producer of the good

Correct Answer:

Income of the consumer

Explanation:

The correct answer is Option 2: Income of the consumer.

The classification of goods as inferior or normal depends on the income of the consumer. An inferior good is a good for which the demand decreases as the consumer's income increases. This means that as consumers become wealthier, they tend to purchase less of the inferior good and more of substitute goods.

For example, rice may be an inferior good for a wealthy consumer who can afford to purchase more expensive food options, such as steak or seafood. However, rice may be a normal good for a low-income consumer who relies on it as a staple food source.

Similarly, 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.