Question

What is an inferior good? In what manner is the demand curve of such a good affected when income of the consumer increases? Use diagram.

Answer 1

Inferior good: When with the increase in income of the consumer, the demand for a good decrease and, vice versa, the good is called an "inferior good".

When income of the consumer increase, demand for the inferior goods decreases. Due to which demand curve shifts leftward. When consumer's income rises, demand curve shifts leftward from DD to D₁ D₁.