Question

what happens to equilibrium price and quantity if the income of the consumer rises in the case of normal goods or inferior goods

Answer 1

Dear student,

Normal good: In case of normal goods, a rise in the income of the consumer leads to a rise in the demand for the good. With the supply of the good remaining the same, it leads to a rise in both the equilibrium quantity and the equilibrium price of the good.

Inferior good: Demand for inferior goods share a negative relationship with the income. A rise in the income of the consumer, leads to a fall in the demand for the inferior good. With the supply of the good remaining the same, it leads to a fall in both the equilibrium price and equilibrium quantity of the good.

Regards