Managerial Economics Essay

5579 Words Nov 14th, 2012 23 Pages

Name of the candidate: ASIF EKBAL Enrolment no. : 08715903912

Course: MBA 1ST Yr.

Batch: 2012


Subject code: MS105

Topic of assignment: UNIT 1

Subject Teacher’s name: MS MAMTA RANI

Research Assignment

Q.1) “Inferior goods are not those goods in case of which the law of demand fails, inferior goods are those goods in case of which income effect is negative or these are the goods the demand for which decreases when income increases
Yes, law of demand fails in case of GIFFIN GOODS. It is in the case of these goods that there is
(A) Inverse relationship
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A part of the money, so gained, can be used for purchasing some more units of the commodity. Therefore, when price falls the amount purchased increases. When price falls, the consumer’s income is in effect reduced and he has to curtail his expenditure on the commodity. So the amount purchased falls.

Inferior goods: - Inferior goods are those goods for which the demand of the product falls as the wealth of the consumer increases. As in the case of inferior goods, the consumers become monetarily better, the demand for such goods falls because the consumer can now afford better substitutes product or goods.
Examples: - 1) cheaper cars (2) Used television
Giffen goods: - Giffen goods are those goods which people consumes more of as the price increases. In case of Giffen goods the price here for the goods does not matters to the consumers. They tend to buy more of these goods when their prices increase. The income effect is positive.
Example: - Staple foods like potatoes are of inferior quality whose demand is driven by poverty that makes their purchases unable to afford superior foodstuffs. As the price of the cheap staples rises, they cannot afford to supplement their diet with better foods, and must consume more of the

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