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Question

Explain, with the help of diagrams, the effect of the following changes on the demand of a commodity:

(i) An unfavourable change in taste of the buyer for the commodity.

(ii) A fall in the income of its buyer, if the commodity is inferior.

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Solution

(i) The demand for a commodity and unfavourable change in taste of the buyer are inversely related to each other. When there is an unfavourable change in taste of the buyer for the commodity, the demand for the commodity falls at the same price and as a result, the demand curve shifts to the left. The following diagram shows the effect :

In the diagram, demand curve of X is shown by the DD curve. With an unfavourable change in taste of the buyer for the commodity, the quantity demanded of good X, falls from OQ to OQ1 at the same price OP. The demand curve shifts leftward from DD to D1D1

(ii) The demand for an inferior good and change in the income of the buyers are inversely related to each other. When there is a fall in the income of the buyers, the demand for the inferior good rises and as a result, the demand curve shifts to the right.The following diagram shows the effect :

In the diagram, demand curve of X (inferior good) is shown by DD curve. With a fall in the income of the buyer, the quantity demanded of inferior goods rises from OQ to OQ1 at the same price OP. The demand curve shifts rightward from DD to D1D1.


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