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Question

Distinguish between -Inferior Goods and Normal Goods.

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Solution

INFERIOR GOODS NORMAL GOODS
Inferior goods refer to those goods whose demand decreases with an increase in income.

Normal goods refer to those whose demand increases with an increase in income.

For example, if the income of a consumer rises and he now prefers to replace his black and white TV with a colored one, then Black and white TV is an inferior good. For example, if the demand of TV increases with a rise in income, then TV is called a normal good.
Income effect is negative in case of inferior goods. Income effect is positive in case of normal goods.

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