Which of the following pairs is correctly matched?
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) → Inferior good — Demand moves in the opposite direction of income
Each pair links a kind of good to how its demand behaves. Only the inferior-good pair is right.
Option (1) Giffen good — Substitution effect stronger than the income effect — Incorrect. A Giffen good arises when the income effect is stronger than the substitution effect.
Option (2) Inferior good — Demand moves in the opposite direction of income — Correct. When income rises, the demand for an inferior good falls, and the other way round.
Option (3) Complementary goods — Demand moves in the direction of the other good’s price — Incorrect. Demand for a good moves opposite to the price of its complement; it moves with the price of a substitute.
Option (4) Normal good — Demand falls as income rises — Incorrect. For a normal good, demand rises as income rises.
NCERT (2026-27): “2.4.3 Normal and Inferior Goods … For most goods, the quantity that a consumer chooses, increases as the consumer’s income increases and decreases as the consumer’s income decreases. Such goods are called normal goods. Thus, a consumer’s demand for a normal good moves in the same direction as the income of the consumer. However, there are some goods the demands for which move in the opposite direction of the income of the consumer. Such goods are called inferior goods. …” “… If the substitution effect is stronger than the income effect, the demand for the good and the price of the good would still be inversely related. However, if the income effect is stronger than the substitution effect, the demand for the good would be positively related to its price. Such a good is called a Giffen good.” “2.4.4 Substitutes and Complements … In general, the demand for a good moves in the opposite direction of the price of its complementary goods. …” |