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Question

A good is an inferior good for one and at the same time normal good for another consumer. Do you agree? Explain.

Or

Price elasticity of demand for flowers and toys are respectively (-) 0.9 and (-) 0.5. Demand for which one is more elastic and why?

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Solution

Yes, the same good can be inferior for one and normal for another. Whether a good is inferior or normal is determined by the income level of the consumer. A good which is a normal good for the consumer having lower income, may become an inferior good for the consumer having higher income. When a consumer moves to higher income, he/she may consider some goods below their income status, and treats them as inferior.

(or)

Demand for flowers is more elastic. It is because with one percent fall in price of flowers demand for flowers rises by 0.9 percent, while in case of toys one percent fall in price raises demand for toys by 0.5 percent.


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