Question

Cite an example of a product you have recently purchased that might be classified as an inferior good. Cite an example of a product you have recently purchased that might be classified as a superior good (luxury). Explain the rationale behind the classification of each.

Answer 1

Answer :-

Superior good :- In case of superior goods, like wheat, rice etc., an increase in the income of the buyer increases his demand for that commodity and a fall in income of buyer reduces the demand for the commodity. Thus, There is a positive relationship between income of buyer and demand of superior goods. It is called positive income effect.

Inferior good :- In case of inferior goods like bajra (a staple food for the poor majority people of the deserts of Rajasthan state in India), there is negative relationship between the income of the buyer and his demand for inferior goods. It is called negative income effect. When the income of buyer rises, the demand for inferior goods falls and when income of buyer falls, demand for inferior goods rises.