Question

Explain how rise in income of a consumer affects the demand of a good give examples

Answer 1

Rise in income increases the purchasing power of the consumer. Hence the consumer will be able to buy more of that good. This will ultimately increase the demand for that commodity. Also it should be kept in mind that this is with the case of normal goods. But in Case of inferior goods people with increased income will switch from inferior goods and will start consuming normal goods. Hence demand for Inferior goods will decrease.

eg. when income of a consumers rises from Rs 30000 to 40000 he started consuming more wheat in his house as it is a normal good for him and started consuming Bajra in less quantity as it was an inferior good.