UPSC Exam > UPSC Questions > A consumer at present consumes a commodity wh...
Start Learning for Free
A consumer at present consumes a commodity which he finds inferior as his present income does not allow him to move to his demand for normal good. If he shifts to a higher income group what changes will take place. Explain using suitable diagrams.?
Most Upvoted Answer
A consumer at present consumes a commodity which he finds inferior as ...
Impact of Income Increase on Consumer Behavior
When a consumer experiences an increase in income, their consumption patterns for inferior and normal goods undergo significant changes. This shift can be illustrated through various economic principles.
Change in Consumption
- Inferior Goods: As income rises, consumers tend to decrease their consumption of inferior goods (goods for which demand falls as income increases).
- Normal Goods: Simultaneously, the consumer will increase their consumption of normal goods (goods for which demand rises as income increases).
Substitution Effect
- Switching to Normal Goods: With more disposable income, consumers substitute normal goods for inferior ones, leading to an overall increase in utility.
Income Effect
- Increased Demand for Normal Goods: The income effect reflects that as income rises, the purchasing power increases, allowing the consumer to buy more normal goods and less of the inferior ones.
Graphical Representation
- Indifference Curves: In a typical indifference curve analysis:
- The initial budget constraint reflects the lower income level.
- The new budget constraint shifts outward with increased income, allowing access to higher levels of utility.
- The consumer moves to a higher indifference curve, indicating a preference for normal goods over inferior goods.
Conclusion
In summary, an increase in income leads consumers to reduce their consumption of inferior goods while increasing their demand for normal goods, ultimately enhancing overall satisfaction and utility in their consumption choices. Understanding this transition is crucial for analyzing consumer behavior within economic frameworks.
When a consumer experiences an increase in income, their consumption patterns for inferior and normal goods undergo significant changes. This shift can be illustrated through various economic principles.
Change in Consumption
- Inferior Goods: As income rises, consumers tend to decrease their consumption of inferior goods (goods for which demand falls as income increases).
- Normal Goods: Simultaneously, the consumer will increase their consumption of normal goods (goods for which demand rises as income increases).
Substitution Effect
- Switching to Normal Goods: With more disposable income, consumers substitute normal goods for inferior ones, leading to an overall increase in utility.
Income Effect
- Increased Demand for Normal Goods: The income effect reflects that as income rises, the purchasing power increases, allowing the consumer to buy more normal goods and less of the inferior ones.
Graphical Representation
- Indifference Curves: In a typical indifference curve analysis:
- The initial budget constraint reflects the lower income level.
- The new budget constraint shifts outward with increased income, allowing access to higher levels of utility.
- The consumer moves to a higher indifference curve, indicating a preference for normal goods over inferior goods.
Conclusion
In summary, an increase in income leads consumers to reduce their consumption of inferior goods while increasing their demand for normal goods, ultimately enhancing overall satisfaction and utility in their consumption choices. Understanding this transition is crucial for analyzing consumer behavior within economic frameworks.
Attention UPSC Students!
To make sure you are not studying endlessly, EduRev has designed UPSC study material, with Structured Courses, Videos, & Test Series. Plus get personalized analysis, doubt solving and improvement plans to achieve a great score in UPSC.
|
Explore Courses for UPSC exam
|
|
Top Courses for UPSCView all
A consumer at present consumes a commodity which he finds inferior as his present income does not allow him to move to his demand for normal good. If he shifts to a higher income group what changes will take place. Explain using suitable diagrams.?
Question Description
A consumer at present consumes a commodity which he finds inferior as his present income does not allow him to move to his demand for normal good. If he shifts to a higher income group what changes will take place. Explain using suitable diagrams.? for UPSC 2024 is part of UPSC preparation. The Question and answers have been prepared according to the UPSC exam syllabus. Information about A consumer at present consumes a commodity which he finds inferior as his present income does not allow him to move to his demand for normal good. If he shifts to a higher income group what changes will take place. Explain using suitable diagrams.? covers all topics & solutions for UPSC 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for A consumer at present consumes a commodity which he finds inferior as his present income does not allow him to move to his demand for normal good. If he shifts to a higher income group what changes will take place. Explain using suitable diagrams.?.
A consumer at present consumes a commodity which he finds inferior as his present income does not allow him to move to his demand for normal good. If he shifts to a higher income group what changes will take place. Explain using suitable diagrams.? for UPSC 2024 is part of UPSC preparation. The Question and answers have been prepared according to the UPSC exam syllabus. Information about A consumer at present consumes a commodity which he finds inferior as his present income does not allow him to move to his demand for normal good. If he shifts to a higher income group what changes will take place. Explain using suitable diagrams.? covers all topics & solutions for UPSC 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for A consumer at present consumes a commodity which he finds inferior as his present income does not allow him to move to his demand for normal good. If he shifts to a higher income group what changes will take place. Explain using suitable diagrams.?.
Solutions for A consumer at present consumes a commodity which he finds inferior as his present income does not allow him to move to his demand for normal good. If he shifts to a higher income group what changes will take place. Explain using suitable diagrams.? in English & in Hindi are available as part of our courses for UPSC.
Download more important topics, notes, lectures and mock test series for UPSC Exam by signing up for free.
Here you can find the meaning of A consumer at present consumes a commodity which he finds inferior as his present income does not allow him to move to his demand for normal good. If he shifts to a higher income group what changes will take place. Explain using suitable diagrams.? defined & explained in the simplest way possible. Besides giving the explanation of
A consumer at present consumes a commodity which he finds inferior as his present income does not allow him to move to his demand for normal good. If he shifts to a higher income group what changes will take place. Explain using suitable diagrams.?, a detailed solution for A consumer at present consumes a commodity which he finds inferior as his present income does not allow him to move to his demand for normal good. If he shifts to a higher income group what changes will take place. Explain using suitable diagrams.? has been provided alongside types of A consumer at present consumes a commodity which he finds inferior as his present income does not allow him to move to his demand for normal good. If he shifts to a higher income group what changes will take place. Explain using suitable diagrams.? theory, EduRev gives you an
ample number of questions to practice A consumer at present consumes a commodity which he finds inferior as his present income does not allow him to move to his demand for normal good. If he shifts to a higher income group what changes will take place. Explain using suitable diagrams.? tests, examples and also practice UPSC tests.
|
|
Explore Courses for UPSC exam
|
|
Suggested Free Tests
Signup for Free!
Signup to see your scores go up within 7 days! Learn & Practice with 1000+ FREE Notes, Videos & Tests.
|
© EduRev
|
Education Revolution
|
Follow Us
|
Signup to see your scores
go up within 7 days!
Access 1000+ FREE Docs, Videos and Tests
Takes less than 10 seconds to signup