Managerial Economics Essay

5571 Words Oct 18th, 2012 23 Pages

Name of the candidate: ASIF EKBAL Enrolment no. : 08715903912

Course: MBA 1ST Yr.

Batch: 2012


Subject code: MS105

Topic of assignment: UNIT 1

Subject Teacher’s name: MS MAMTA RANI

Research Assignment

Q.1) “Inferior goods are not those goods in case of which the law of demand fails, inferior goods are those goods in case of which income effect is negative or these are the goods the demand for which decreases when income increases
Yes, law of demand fails in case of GIFFIN GOODS. It is in the case of these goods that there is
(A) Inverse relationship
…show more content…
The quantity demanded for Giffen goods rises as their price rises, which is an exception to the law of demand. * If fish becomes more costly, some people will buy more of it just to show that they are rich enough to buy it. On the other hand, when such goods become cheaper, they are purchased less. So the law of demand does not hold good here. * A few goods like diamonds etc are purchased by the rich and wealthy sections of the society. The prices of these goods are so high that they are beyond the reach of the common man. The higher the price of the diamond the higher the prestige value of it. So when price of these goods falls, the consumers think that the prestige value of these goods comes down. So quantity demanded of these goods falls with fall in their price. So the law of demand does not hold good here. Explanation of this statement:
“WHILE ALL GIFFEN GOODS ARE INFERIOR GOODS, ALL INFERIOR GOODS ARE NOT GIFFEN GOODS.” * The demand for an inferior goods decreases with the increase in income of the consumer. But for normal goods the demand increases with the increase in the price of the product/goods or with the increase in income.
Inferior goods are basically those goods whose income effect is negative and it is associated with the lower socio-economic groups. The classical example of inferior goods is Inter-city bus service.
This form of transportation is cheaper than the air or rail travel, but it is more time

Related Documents