Question

What are normal good, inferior good, ordinary good, the Giffen good, necessary good, and luxury good? How do you distinguish them from each other? [hint: the differences in the definitions]

Answer 1

Normal goods are those goods whose demand increases with an increase in income of the consumer and vice-versa.

Inferior goods are those goods whose demand increases with a decrease in the income of the consumer and vice-versa.

Giffen Goods violates the law od demand their demand increases with an increase in price and vice-versa.

Necessity goods have inelastic demand as their demand remains almost the same irrespective of their price. for example medicine.

Luxury goods have highly inelastic demand as their demand falls greatly with an increase in the price of the goods.

Ordinary goods refer to those goods that follow the law of demand as their demand increases with a drop-in price and vice versa.

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