In view of the fact that kerosene is an inferior good in India, what is/are its implication(s)? 1. As households get richer, they consume less kerosene. 2. Over time there is a decline in quality of kerosene. 3. Government needs to stop subsidies on kerosene. Select the correct answer using the code given below.

Question

YESPYQ · Accepted Answer

Correct answer: a) 1 only. Key Points- Inferior goods refer to those type of goods whose demand decreases with increase in income of households. Explanation- Since kerosene is an inferior good, its demand will decrease with the rise of income of households. With the rise in income of households, they can afford other costlier alternatives in place of inferior goods. Thus, Statement 1 is correct. Statements 2 and 3 are incorrect as there is not necessarily a decline of quality of inferior goods after a period of time. Hence the correct answer is Option A i.e 1 only is the correct answer.

In view of the fact that kerosene is an inferior good in India, what is/are its implication(s)? 1. As households get ric…

Practice more Defence Economics PYQs