Chapter 2R, Problem 4MCQ

To determine

The impact of higher income on the demand for goods.

Explanation of Solution

A good is considered normal when its demand rises with an increase in the income of consumers. Mobile phones, laptops, refrigerators, shoes, clothes, watches, and other similar products are examples of normal goods.

The other options are incorrect because:

1. The demand for inferior goods falls with a rise in the income level.<
2. The demand for all goods can’t increase with the increase in the price level, for example, demand for inferior goods falls when income increases.<
3. The demand for normal goods increases with an increase in income.<
4. The demand for all goods can’t fall with an increase in the price level, for example, demands for normal goods.

Thus, option “b” that is, “demands for normal goods will rise when consumer’s income increases” is the correct option.