Question

Consider the consumer only consumes two goods namely flour and potatoes. Potatoes are an

inferior good. Do you think that flour can also be inferior goods? Give your reviews. If the price

of flour falls, illustrate the impact on the consumption of flour and potatoes using substitution

effect and income effect​

Answer 1

Explanation:

An inferior good is a type of good whose demand declines when income rises. ... Therefore, he will switch his flour demand from jowar to wheat. Hence jowar, whose demand has fallen due to an increase in income, is the inferior good and wheat is the normal good.

Answer 2

An inferior good is a type of good whose demand declines when income rises and demand of inferior goods is inversely related to the income of the consumer.

Explanation:

• The consumers are consuming both flour and potatoes.
• Presently both commodities face a downward sloping graph, that is the higher the price the lesser will be the demand and vice versa.
• If the income of consumer rises, then he would be more inclined towards flour, which is a little costly than potato.
• The mindset of the consumer behind this behavior is that now he can afford flour because of his increase in income.
• Therefore, the consumer will switch his flour demand from potato to flour.
• Hence potato, whose demand has fallen due to an increase in income, is the inferior good and flour is the normal good.

To Learn More...

1.Consider the consumer only consumes two goods namely flour and potatoes. Potatoes are an inferior good. Do you think that flour can also be inferior goods? Give your reviews. If the price of flour falls, illustrate the impact on the consumption of flour and potatoes using substitution effect and income effect.

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