+91-8076753736 support@wiredfaculty.com

Sponsor Area

Theory Of Consumer Behaviour

Question

Wired Faculty App

Explain the relationship between income of the buyers and demand for a good.

Solution

Income of the Buyer and the Demand for a Good:
Income of consumer is an important determinant of demand. The rise and fall of the demand for a good as per the rise in income of consumers depends upon the nature of good. Normal goods have a positive income elasticity of demand, so as consumers' income rises, more will be the demand. A rise in the income of the consumer will increase the demand for the good. In the case of Luxury goods and services, demand rises more than proportionate to a change in income. Inferior goods have a negative income elasticity of demand meaning that demand falls as income rises.

Some More Questions From Theory Of Consumer Behaviour Chapter

What is demand function? State a consumer's demand function.

Distinguish between 'Change in demand' and 'Change in quantity demanded of a commodity'.

Starting from an initial situation of consumer's equilibrium, suppose that marginal utility of a rupee increases. Will it increase or decrease the quantity demanded of the product?

What are two approaches to attain the state of consumer's equilibrium?

Define indifference curve.

What is meant by marginal rate of substitution (MRS)?

Why is MRS always diminishing?

When does a consumer attain equilibrium according to indifference curve approach?

Give meaning of demand.

Name two determinants of demand.

Mock Test Series

Mock Test Series

NCERT Sample Papers

Entrance Exams Preparation