Compare and contrast a normal, an inferior and a Giffen good in terms

Question

Compare and contrast a normal, an inferior and a Giffen good in terms of income elasticity of demand.

21 Jan 2021

Answer :

Word Count : 442

Sure, let's delve into the concepts of normal, inferior, and Giffen goods in terms of income elasticity of demand.

### Normal Goods:
Normal goods are those for which demand increases as consumer income rises and decreases as consumer income falls, assuming all other factors remain constant. The income elasticity of demand for normal goods is positive but less than 1 (i.e., 0 < income elasticity < 1). Examples of normal goods include clothing, electronics, and most everyday consumer items. For these goods, as people earn more, they tend to purchase more of them because they have more disposable income.

### Inferior Goods:
Inferior goods are goods for which _______ ______ ____ _______ _________ ____.
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