Based on my book. Goods like bajra are a normal good for a rich person But an inferior good for poor person This is. Because due to lack of money a poor person is forced to consume grains like bajra and with rise in income he will consume superior goods. But in multiple answers on merit nation the complete opposite answer is given saying goods like bajra are an inferior good for rich and normal for poor. Which is correct??
Logical Analysis - Inferior goods
No commodity is inferior. If any commodity is purchased by a consumer just because of his low income level,, then this commodity is termed as an inferior commodity for that person. For example, Bajra is a normal commodity for a rich person. But, if low income of a poor person forces him to consume bajra everyday then bajra will be an inferior commodity for him. it is not the consumer but the income level of the consumer which determines whether a good is normal or inferior. So, inferiority is a relative concept.
I think youre misunderstanding what the book is saying. It is additional information which isnt required for the exam but aids in understanding.
What theyre saying is that the determinant of whether bajra is a normal good or inferior good is not on bajra but on the reason (income related) why he is purchasing bajra.
They are saying that in the normal world bajra is a normal good as with increase in income we buy more bajra. So usually it is a normal good.
However consider a situation where someone is buying bajra due to his low income. He is buying it because he is poor and its the only thing he can afford. In that case 'bajra' is an inferior good.
Its not to say that in the real world Bajra is an inferior good but that in an example of a alternate world where people buy bajra because it is v. cheap it is an inferior good.
What theyre saying is that the determinant of whether bajra is a normal good or inferior good is not on bajra but on the reason (income related) why he is purchasing bajra.
They are saying that in the normal world bajra is a normal good as with increase in income we buy more bajra. So usually it is a normal good.
However consider a situation where someone is buying bajra due to his low income. He is buying it because he is poor and its the only thing he can afford. In that case 'bajra' is an inferior good.
Its not to say that in the real world Bajra is an inferior good but that in an example of a alternate world where people buy bajra because it is v. cheap it is an inferior good.