Q17 of 26 Page 34

What do you mean by a normal good?

A good having inverse relationship with price but direct relationship with income is called Normal goods. The demand for normal good increases with increase in income and decreases with rise in price.









At price P, the quantity demanded is Q, when the price increases to P1 the quantity demanded is reduced to Q1. When the price decreases to P2 the quantity demanded is increased to Q2












At income P, the quantity demanded is Q, when the income increases to P1 the quantity demanded is increased to Q1. When the income decreases to P2 the quantity demanded is decreased to Q2



More from this chapter

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15

Suppose there are 20 consumers for a good and they have identical demand functions:

d(p) = 10 – 3p for any price less than or equal to 10/3 and d1(p) = 0 at any price greater than 10/3.


What is the market demand function?

 16

Consider a market where there are just two consumers and suppose their demands for the good are given as follows:

Calculate the market demand for the good.







































P



d1



d2



1



9



24



2



8



20



3



7



18



4



6



16



5



5



14



6



4



12


 18

What do you mean by an ‘inferior good’? Give some examples.

 19

What do you mean by substitutes? Give examples of two goods which are substitutes of each other.