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Theory Of Consumer Behaviour

Question

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Differentiate between a normal good and an inferior good.

Solution

When rise in income leads to rise in demand for a good, that good is called a normal good. (Positive relationship).

When rise in income leads to fall in demand for a good, that good is called an inferior good. (Negative relationship)

Some More Questions From Theory Of Consumer Behaviour Chapter

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.

List the factors that cause changes in demand.

What is law of demand?

What is demand schedule?

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