CMA Foundation · Fundamentals of Business Economics and Management · Theory of Demand and Supply
Rohan's income rises from ₹30,000 to ₹45,000 per month. His monthly purchase of public bus travel falls from 40 trips to 25 trips because he now uses his own car. For Rohan, bus travel is best described as:
Bus travel is an inferior good for Rohan because his consumption falls as his income rises. Inferior goods have a negative relationship between income and demand, unlike normal goods, whose demand increases when consumer income increases.
- AA normal good
- BA Giffen good
- CA complementary good
- DAn inferior goodCorrect
Explanation
Demand for bus travel falls when income rises, which is the definition of an inferior good (negative income effect). A normal good would show rising demand with income. Complementary describes a relation between two goods, not the income response.
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