Page 109 - DECO401_MICROECONOMIC_THEORY_ENGLISH

Microeconomic Theory

Notes 3. Income of Consumer

In between income of the consumer and demand of commodity generally a relation is found. On
increasing in income demand of goods increases and on decreasing of income demand decreases. In
economics such goods are known as Normal Goods. Normal goods are goods whose demand increase
with the increase in the income of consumer. Some goods are also of a type that is known as Inferior
Goods. Inferior goods are goods whose demand increase with the increase in the income of consumer.
So, demand of a commodity and income of the consumer can be related as following in the context of
three classes:
(i) Normal Goods, (ii) Inferior Goods, and (iii) Necessaries of life and Inexpensive goods

Fig. 6.6

Y
D
Y
1 Normal Goods
Income Y

D

O X
Q Q
1
Quantity

(i) Normal Goods: Normal goods are goods whose demand increase with the increase in income
of the consumer and decrease with the decrease in income. In this way, there is a true or positive
relation between income of consumer and quality demanded, this is showed by Fig. 6.6. It is
clear from Fig. 6.6 that demand of goods shows the increase from OQ to OQ to increase in the
1
income of consumer. Slope of demand curve DD goes from left to right in upper side which
refers to true or positive relation of income and quantity demanded.
(ii) Inferior Goods: Inferior or poor quality goods are goods whose demand decrease with the
increase in income of consumer and increase with decrease in income. In this way, there is an
inverse relation between income and demand of inferior goods. Figure 6.7 shows this relation.

Fig. 6.7
Y
D
Y
1
Inferior Goods
Income Y

D
O X
Q Q
1
Quantity

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