Economics Chapter on Demand for Commodity X

Effects of Income on Demand for Commodity X

• A consumer's increase in income generally leads to a rise in the quantity demanded for commodity X.
• Table displays two demand schedules for commodity X based on different income levels: ₹5,000 and ₹10,000.
• Demand increases at each price level when income rises:
  • At ₹4, the quantity demanded increases from 15 units (income = ₹5,000) to 20 units (income = ₹10,000).
• The demand curve for commodity X shifts rightward as income rises, indicating increased purchasing desire.

Types of Goods and Their Demand Responses

• Normal Goods:

  • Demand increases with rising incomes; examples include furniture, clothing, consumer durables.
  • A decrease in income (e.g., during a recession) typically reduces demand for normal goods.

• Inferior Goods:

  • Demand initially rises with income but can decline beyond a certain income level.
  • Essential goods like food grains and clothing tend to see less than proportional demand increases relative to income.

• Luxury and Prestige Goods:

  • Demand continues to rise with increasing income beyond a specific threshold.

Demand Curve Shifts

• An increase in income leads to a rightward shift of the demand curve.
• A decrease in income shifts the demand curve leftward, reflecting reduced quantity demanded at all prices.

Summary of Non-Price Determinants Impacting Demand

• Factors Causing Increase in Demand:

  • Rise in income (for normal goods).
  • Increase in wealth (for normal goods).
  • Higher prices of substitute goods.
  • Lower prices of complementary goods.
  • An increase in the number of buyers.
  • Positive change in consumer tastes favoring the commodity.
  • Redistribution of income favoring the commodity.

• Factors Causing Decrease in Demand:

  • Fall in income (for normal goods).
  • Decrease in wealth (for normal goods).
  • Decrease in prices of substitute goods.
  • Higher prices of complementary goods.
  • A decrease in the number of buyers.
  • Negative change in consumer tastes against the commodity.
  • Redistribution of income away from those favoring the commodity.