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Theory of consumer behaviour — Economics STD 11 Commerce — Question

CBSE BoardEnglish MediumSTD 11 CommerceEconomicsTheory of consumer behaviour6 Marks
Question
Explain the difference between (i) inferior goods and normal goods and (ii) cardinal utility and ordinal utility. Give example in each case.
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Answer

  1. Any good whose demand falls with rise in income is called an Inferior good.
Example: Suppose with rise in income a consumer buys less of X and instead buys more of Y then good X is inferior for that consumer.
Normal good is one whose demand rises with rise in income. Suppose with rise in income consumer buys more of X, then X is a normal good for that consumer.
  1. When utility can be expressed in exact units it is called Ordinal Utility.
Suppose a consumer says that he gets 2 units of utility from consumption of a good than it is Cardinal Utility. When utility is expressed in rank it is called Ordinal Utility. When a consumer says he gets less satisfaction from second unit as compared to the first unit, it is expression in terms of ordinal utility.

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