Question

Explain the following 1. normal good 2. inferior good 3. substitute good

Answer 1

1. Normal goods - Normal goods are the any goods for which the demands increase when income increase , and falls when income decrease but the price remains constant that is which a position income elasticity of demand . 2. Inferior Goods - Inferior goods is a goods that decrease in demand when consumer income rises , unlike normals goods for which the opposite is observed . Normal goods are those for which consumers demands increases when their income increases . 3. Substitute goods - Substitute goods are two goods that could be used for the same purpos. If the price of one goods increase , then demand for the substitute is likely to rise . Therefore , substitute have a position cross elasticity of demand .