Question

Explain the effect of change in income of a consumer on demand for a good.Answers

Answer 1

Answer:

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Explanation:

the good is a 'normal good', a rise in income will raise the demand for that good' If the good is an 'inferior good' a rise in income will reduce the demand of a good. Based on the effects of change in income on demand for a good, there are two types of goods: (i) Normal goods: There is a direct relationship between income of the consumer and demand for normal goods, i.e., if income increases demand increases or income decreases demand decreases as shown in the diagram. Increase in income of the consumer Decrease in income of the consumer (ii) Inferior goods: There is an inverse relationship between income of the consumer and demand for inferior goods, i.e., if income increases demand decreases or income decreases demand increases as shown in the diagram. Increase in income of the consumer Decrease in income of the consumer Read more on Sarthaks.com - https://www.sarthaks.com/78305/explain-the-effects-of-change-in-income-on-demand-for-a-good

Answer 2

Answer:

If the commodity is a normal good, then an increase in the income of the consumer leads to an increase in demand for the commodity or the demand curve shifts rightward.

On the other hand if the commodity is an inferior good, then an increase in income of the consumer leads to a decrease in demand of the commodity or the demand curve shifts leftward.