Question on Economics. Urgent!?

Question

What is the demand curve of an inferior good like (attach an image if possible)?

What is the significance of inferior goods?

Is it confirmed that Total Revenue should increase when the price increases, if the PED is inelastic?

We don't have a text book to consult (not yet).

P.S. I am a High School Junior.

Answer 1

An inferior good is a good such that as income decreases, demand increases.  If you had a graph, then, with quantity demanded on the x-axis and income on the y-axis, it would be negatively sloped like so: \.

The significance of inferior goods then is that they are consumed more when a country or demographic is poor.  Consider food for example: healthy food tends to be more expensive than unhealthy food, such as fast food.  As a result, it may be harder for poor people to improve their nutritional health since they cannot afford to buy the more expensive healthy food.  It is also an interesting phenomenon to have demand of a good increase as income gets smaller.

For your third question, when demand is inelastic, that means that consumers do not care much about changes in price; they will usually consume about the same amount.  To put it another way, big price increases will have minimal effects on quantity demanded.  Consequently, with inelastic demand, price increases will increase total revenue.

Hope that helps.

Answer 2

An inferior good is one for which raising the price increases demand. Designer perfume might be an example. You might sell more units at $60 than $10  because people take cues of quality from the price.  

Answer 3

You should email your teacher for help

Answer 4

1. The demand curve for an inferior good is like any other normal good-  it follows the Law of Demand. That is, it is downward sloping.

2. The significance of inferior good is that as income rises, the demand for it FALLS. For normal goods like jeans cars, etc, an increase in income would lead to an increase in demand, thereby shifting the demand schedule to the right. However for inferior goods like fake LVs, an increase in income would lead to a fall in demand for these goods as consumers can now afford the real thing. Hence , demand shifts LEFT.

3. When PED is inelastic, an increase in price leads to a LESS than a proportionate fall in quantity demanded. In other words, the quantity demanded does not fall that much. Hence, the total revenue, which is equal to it's Price x Quantity, RISES, as the positive effect(price increase) is more then the negative effect(fall in Q).