UGM June 2019 Q10
- Option : C
- Explanation : Technically, normal goods are those that are demanded in increasing quantities as consumers’ income rises. Clothing, household furniture, and automobiles are some of the important examples of this category of goods. The nature of relation between income and demand for the goods of this category is shown by the curve NG in Fig. As the curve shows, demand for such goods increases with the increase in income of the consumer, but at different rates at different levels of income. Demand for normal goods increases rapidly with the increase in the consumer’s income but slows down with further increases in income.
It may be noted from Fig. that up to a certain level of income (Y1) the relation between income and demand for all types of goods is similar. The difference is only of degree. The relation becomes distinctly different beyond the Y1 level of income. From a managerial point of view, therefore, it is important to view the income-demand relations in the light of the nature of the product and the level of consumers’ income.
