Question
Distinguish between normal goods and inferior goods, with examples.
Basis | Normal Goods | Inferior Goods |
Definition | Normal goods are those goods whose demand increases with the increase in income and whose demand decreases with a fall in income. | Inferior goods are those goods whose demand increases with a fall in income and whose demand falls decreases with a rise in income. |
Income Effect | In case of normal goods, there is a positive income effect. | In case of inferior goods, there is a negative income effect. |
Examples | Branded Clothes, Wheat, Milk. | Coarse Cereals, Public Transportation - Bus, rail pass. |
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| (Rs. in lakhs) | ||
| 1 | Net indirect tax | 20 |
| 2 | Purchase of intermediate products | 120 |
| 3 | Purchase of machines | 300 |
| 4 | Sales | 250 |
| 5 | Consumption of fixed capital | 20 |
| 6 | Change in stock | 30 |