Need help on normal and inferior goods(ECONS)

• N0body

  25 Apr 08, 01:56

  i desperately need help. my exams is next week and i got no one to help me. when drawing the graph for budget. how to know which side we shld put as normal and which side as inferior? thks!
• eagle

  25 Apr 08, 02:07

  what do you mean by graph for budget?

• N0body

  25 Apr 08, 02:29

  a graph where u shift the budget line. Example, when price of good x decrease. the budget line will rotate more out wards as u can buy more good x. den u have to see whether the right side is normal or inferior. my lect told me income increase , normal x will increase. i know but how to compare. i know it sound hard to figure what i tryin to explain here.. argh nvm
• eagle

  25 Apr 08, 02:36

  ok I get what you mean. Normally, people would use the word as demand instead of budget.

  From wiki, in consumer theory, an inferior good is a good that decreases in demand when the consumers income rises, unlike normal goods, for which the opposite is observed.

  So, you can only see the difference when you plot it against income. Other than that, it will have to depend on the elasticity of demand.

   

• N0body

  25 Apr 08, 02:42

  ya in theory i understand, how ever on graph i m quite confused. example scenario 1, price decrease, right side is normal Scenario 2 price decrease also., however right side is inferior now. how come. the graph are exactly e same. i guess it hard to explain over here... anwyay thks alot for ur help appreciate./ :)
• eagle

  25 Apr 08, 02:44

  they look the same because they still follow the basic rules of demand and supply. The only difference is due to income

• N0body

  25 Apr 08, 02:49

  alright :)thks