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Which is an example of an inferior good?
GIFFEN GOODS. In economics, a giffen good is an inferior good with the unique characteristic that an increase in price actually increases the quantity of the good that is demanded. This provides the unusual result of an upward sloping demand curve.
Which is the opposite of a superior good?
Normal goods are those for which consumers demand increases when their income increases. This would be the opposite of a superior good, one that is often associated with wealth and the wealthy, whereas an inferior good is often associated with lower socio-economic groups.
What happens to demand for inferior goods as income increases?
Hence from the above one can see that other things remaining constant as the income of consumer increases demand for normal goods will increase and demand for inferior goods decrease and vice versa.
How does substitution effect work for inferior goods?
For an inferior good, the substitution effect and income effect work in opposite directions.A rise in price leads to a fall in quantity demanded because the relative price of the good has risen.but it leads to a rise in quantity demanded because consumers real income have fallen.
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