The Allocation of Resources

Question 1

What is microeconomics?

Answer 1

Microeconomics studies the economic decisions and action of individual consumer, producers and households and how these economic decisions makers interact.

Question 2

What is macroeconomics?

Answer 2

Macroeconomics considers economic issues and actions that affect the whole economy.

Question 3

What is the problem of Resource allocation?

Answer 3

Deciding how to best allocate limited resources to different productive uses in the problem of resource allocation.

Question 4

Explain the 3 fundamental question that is a result of the basic economic problem.

Answer 4

1. What to Produce and in what quantity: This involves the decision regarding what good or service is to be produced. Eg: Infrastructure, consumer/capital goods, Merit/Demerit, need/want etc.
2. How to produce: This involves the decision regarding how the good/service is to be produced. Eg: Capital Intensive/Labour Intensive etc.
3. For whom to produce: This involves the target audience or the people for whom we want to produce. Eg: Needy/ Ones who can afford, Middle class/Lower class.

Question 5

List and Explain the Types of Economic systems?(*3)

Answer 5

1. Market Economic System: Also known as the Free Market economic system is where the decisions regarding the allocation of resources is taken by consumers, firms and households in the private sector. Therefore there is no role of the government or the public sector.
2. Planned Economic System: It is the complete opposite of the Free Market system. Therefore in a Planned economic system the economic decisions regarding the allocation of the resources is taken by the organisation owned, controlled and accountable to the government.
3. Mixed Economic System: In the world today most of the economies are Mixed Economies. Therefore in a Mixed Economic System the economic decisions are taken by both: the private and public sector thus there government has some control over the decisions taken by private sector.

Question 6

What is a Market?

Answer 6

A market is a platform where consumers and producers engage in trade. A market can therefore be termed as an outcome of the forces of demand and supply.

Question 7

What is Equilibrium?

Answer 7

Equilibrium occurs when the quantity producers are willing and able to sell at a particular price is exactly equal to the consumers are willing and able to buy at the same price.

Question 8

What is Disequilibrium?

Answer 8

Disequilibrium occurs when the quantity producers are willing and able to sell at a particular price is not equal to the consumers are willing and able to buy at the same price.

Question 9

What is Price Mechanism?

Answer 9

Price Mechanism is where the rise/fall in the price of a product signals the producer whether the production of the good is profitable or not. Therefore in a Free Market Economic System the Price Mechanism helps produces determine the 3 fundamental question: What to produce, How to produce and For whom to produce.

Question 10

What is Demand?
What is individual demand and market demand?
Explain the Law of Demand?

Answer 10

Demand quantity of a good consumers are willing able to buy at a particular price and during a given period of time.

1. Individual Demand: it is the demand by just one consumer at a specific price.
2. Market Demand: It is the total demand for a product from all its consumers willing and able to buy it.
3. The law of demand states that as the price of a product rises the quantity demanded for the same decreases and vice-versa. Therefore there is an inverse relationship between the price of the product and the quantity demanded.The Law of Demand talks about the relation between Price and Quantity and not Quantity and Price because in the Law of Demand the price affects the quantity when all other factors are neutral.

Question 11

Explain ‘Movement along the demand curve’ and the 2 types of movements along the demand curve?

What does a market Demand curve show?

Answer 11

Movement along the demand curve shows how consumers will react to a change in the price of the good/service. Movements are a result of Price change and this is when other factors remain constant: Ceteris Paribus

1. Extension of demand: As the price of the product falls, quantity demanded increases.
2. Contraction of demand: As the price of the product rises, the quantity demanded decreases.
3. The market demand curve graphically represents the relationship between the total quantity demanded by consumers each period and the price of the product.

Question 12

What are the factors that can cause a shift of the Demand Curve?(*6)

Answer 12

A shift explains that the consumer will demand a higher/lower quantity for the same price.

1. Changes in the Consumers income: If the income of a consumer increase it is likely that the demand for a certain good will increase as the person will have more disposable income, increased ability of buying goods and services.
2. Changes in Tax on Income (Direct Tax): If the tax on the income is reduced the disposable income of the consumer will increase thus increasing the ability and purchasing power of the consumer.
3. The prices and availability of other goods and services:
   i) complementary goods: Petrol and Cars are complimentary goods therefore if the price of petrol increases the demand of cars will decrease.
   ii) Substitutes: A substitute is a product that when purchased can replace the want for another good.Pepsi and CocaCola are considered to be close substitutes therefore an increase int he price Pepsi will increase the demand of CocaCola.
4. Changes in tastes, habits and fashion: as the world is getting cautious about their body structure, weight, health etc. the demand for gluten-free, fat-free foods has increased
5. :Population change: If there is a migration towards there northern Indian region the demand of warm clothes will increase
6. Successful Advertisement campaign: It can increase the demand of a product as it will bring the product to the notice of potential consumers.
7. Others: Change in laws, weather, interest rates etc.

Question 13

What is Supply?
What does Market Supply mean?
Explain the law of supply?

Answer 13

1. Supply is the quantity of goods sellers are willing(refers to the profitability) and able(cost and factors of production) to sell at a particular price during a period of time
2. Market supply supply for a product is the sum of all the individual supply curves of producers competing to supply that product.
3. the law of supply states that as the price of the product increases the quantity supplied increases as well as the producers would like to use the opportunity and maximise profits.

Question 14

Explain ‘Movement along the supply curve’ and the 2 types of movements along the supply curve?

What does a market Supply curve show?

Answer 14

1. A movement along the supply curve shows/explains how suppliers and producers will react to a change in the price of a good. Th price of the good is considered to change when all other factors are constant.
2. Extension of Supply: As the price of the product increases the quantity supplies increases as well.
3. Contraction of Supply: As the price of the product falls decreases the quantity supplies decreases as well.
4. The supply curve is a graphical representation of the quantity supplied be the producers and the price of the product

Question 15

What are the factors that can cause a shift of the Supply Curve?(*6)

Answer 15

1. Changes in the cost of factors of production: As the cost of factors of production increases the cost production increases thus reducing the profitability of the product/business and vice-versa
2. Changes in the price and profitability of other goods:
   (normally in the same industry eg rice to wheat) If the profitability of growing cabbages increases the farmers producing potatoes and other vegetables might reduce the production of the same and shift their focus crop towards cabbage as to increase profits.
3. Technological advancement: If the technology advances the time taken to produce the product will fall thus increasing the number of units produced per unit time. For example if earlier in a car factory only 4 cars could be assembled in an hour the advancement would result in 5 cars therefore increasing the supply.
4. Business optimism and expectations: As the optimism in a market increases the production will b e fuelled. The supply and research in the field of electric cars has increased due to the expectations and optimism that in the future laws will forbid petrol/diesel cars to a large extent.
5. Taxes: Direct taxes on the firm and indirect taxes such as excise duty and VAT are an additional load that is put on the money involved in the production of goods and services. A rise in the taxes may increase the cost of production of the firm and thus reduce the supply.
6. Subsidy: A subsidy is a payment by the government in order to encourage the production or the consumption of a product. If the government gives a subsidy on the production of good A then the cost of producing the product will also go down thus resulting in a greater supply.
7. Global factors: Sudden change in weather, trade sanctions, wars, natural disasters, political matters et cetera.

Question 16

Give reasons for an increase in the market supply?(*7)

Answer 16

1. Other products become less profitable.
2. A fall in the cost of employing factors of production
3. An increase in resources, new source of raw material
4. Technical progress, improved production process
5. Increase in business optimism and expected profits
6. The government subsidises the production, low taxes
7. Other factors eg: good weather for cropsetc.

Question 17

Give reasons for a decrease in the market supply?(*7)

Answer 17

1. Other products become more profitable
2. A rise in the cost of employing factors of production
3. A decrease in the availability of resources
4. Technical failures, eg: power cuts, breaking of machine
5. Decrease in business optimism and expected losses
6. Withdrawal of government subsidy, increased taxation
7. Other factors eg: drought will reduce supply of crops

Question 18

What is the Equilibrium point on the demand and supply curve diagram?

Answer 18

Graphically, the Point of Equilibrium is the point at which the demand and the supply curve intersect. In a situation of equilibrium there is no excess or shortages thus the economy is in an ALLOCATIVE EFFICIENT SITUATION

Question 19

Explain Disequilibrium and the 2 types of it?

Answer 19

1. Disequilibrium occurs when the quantity producers are willing and able to sell at a particular price is not equal to the consumers are willing and able to buy at the same price.
2. Excess supply: Excess supply is a situation where in due to prices higher than the equilibrium point the amount of goods supplied increases and the amount of goods demanded decreases thus resulting in an excess of supply.
3. Excess Demand: Excess Demand is a situation where in due to prices lower than the equilibrium point the amount of goods supplied decreases and the amount of goods demanded increases thus resulting in an excess of demand.

Question 20

When does the price of a good/service change?

Answer 20

The Price of a good/service changes when the demand and/or supply conditions change.

Question 21

What establishes the market price and the quantity demanded/supplied of a good/service?

Answer 21

The forces of demand and supply.

Question 22

What is Price Elasticity of Demand (PED)?

Provide the Formula for the same and explain when is the demand elastic and inelastic.

Answer 22

1.Price Elasticity of demand is the responsiveness of the consumers to a change in the price of a good or service. The concept of elasticity tells us by how much would be the change change in the quantity demanded for a change in the price of a product.

1. PED= % change in the quantity demanded
   —————————————————–
   % change in the price
2. If PED>1 then the demand is price elastic
   If PED<1 then the demand is price inelastic.
3. elasticity is normally elastic for luxury goods and services but is generally inelastic for necessities.

Question 23

What are the factors that affect the price elasticity of demand(*7)

Answer 23

1. If the product is a necessity: If the price of a product like rice increases in the south of India the Demand won’t significantly fall as it is a basic necessity/ a staple food.
2. If the product has close substitutes: If the price of Pepsi increases in India the population will opt for CocaCola instead as they are considered to be close substitutes.
3. The amount of time the consumer spends in looking for substitutes: If a consumer is looking for a television the consumer will spend enough time searching for the best affordable one as it is expensive and it a one time investment.
4. If the good is habituated / addictive good: If the consumer is habituated to the good for example alcohol the PED will be relatively inelastic as it then becomes a necessity for the consumer.
5. Competition: Cigarettes in general don’t have a substitute as a product but within the market itself there a re many producers who are competition for each other. This makes the demand for the product elastic as there are competitors towards which the consumers may shift.
6. The cost of switching to a different supplier: If a consumer is using TataSky and wants to shift to DishTV the person would simply loose the money he/she had given to TataSky in order to avail the channels.
7. The proportion of the consumers income that is being spent on the product: If a person goes to buy a chips packet that orignally costs about $1 an increase of 10% would mean $1.1 which doeanot really affect the consumer as an additional amount of $0.1 is a very small part of the consumers income but if the same applies to a car worth $100000 increased by 10% to $110000 this would change things.

Question 24

What is Price Elasticity of Supply?

Provide the formula for the same and when the supply is price elastic/ inelastic.

Answer 24

1. Price Elasticity of Supply refers to the responsiveness of the suppliers and sellers to a change in the price of the product.
2. PES= % change in the quantity supplied
   —————————————————–
   % change in the price
3. If PES>1 then the demand is price elastic
   If PES<1 then the demand is price inelastic.

Question 25

What are the factors that affect the Price Elasticity of Supply?(*4)

Answer 25

1. The availability of Stock of finished goods and factors of production: Marlboro keeps a huge stock of cigars so that it can act to a change in the demand and the price patterns immediately thus making the PES elastic. Whereas if a fresh juicer stall on the road keeps 5 kilos of oranges daily from the market 2 km away and a picnic comes and a sudden rise happens he/she cannot act fast.
2. Degree of unused or ‘spare’ production capacity: If a manufacturing company has 8/10 machines working and an increase in demand is seen the company can respond quickly by employing the remaining two machines as well.
3. Time period needed to increase the production: If the time to increase production will be a lot the PES will be inelastic. is a company has 10 machines and a sudden rise in the demand is seen the time the company will take to setup new machines and labour will be long.
4. The mobility and availability of factors of production: if in textile industry the demand increases and the industry can import get more coal and yarn quickly then the industry could be elastic.

Question 26

What happens in a Market economy system and how is the price mechanism used?

Answer 26

In a market economy system the decisions regarding the allocation of resources is taken by private firms. in a free market economy there is no intervention of the government. Resources are allocated buy the forces of demand and supply. In the system Factors of production will be moved from the production of products with falling price to the production of products with rising prices because more profit is possible. this is how price mechanism will be used.

Question 27

What are the advantages of a free market economic system?(*4)

Answer 27

1. A wide variety of goods and services will be provided: this is because private firms will explore as many as possible goods and services as to provide variety that can satisfy and attract the consumer wants.
2. Firms will react quickly to the changes in consumer wants and spending patterns: As the aim of the private firms will be to gain profits they will keep an eye on the consumer demand so that they can reallocate resources into the profitable product that are demanded.
3. Development of new products and efficient production methods: As the aim remains profits they will try and built new products that can satisfy human wants. this way there will be increased exploration into goods and services. Also to reduce the cost of production private firms will find more efficient ways of production to cut down costs.
4. There are few, if any, taxes and regulations: As there is no government there will be no tax collection and therefore the elimination of indirect taxes will increase purchasing power thus increase the flow of money and the fulfilment of wants.

Question 28

What are the disadvantages of a (Free) market economic system?(*5)

Answer 28

1. A few important but non-profitable goods will not be produced: Street lamps for example is a market where charging people foe using it is not possible. therefore the production of the same will not be initiated even though it has many positive externalities.
2. Firms will provide goods and services only to those who can afford it: Producers will only aim at the society which can afford to buy. Poor people who cannot afford to pay for healthcare and education won’t receive it as they can’t pay for it.
3. Resources will be employed in profitable tasks only: this would in turn create unemployment as there will few jobs and also because capital-intensive production is normally more efficient and profitable there will be a urging unemployment rate.
4. Demerit goods and harmful goods may be produced because they are profitable: Goods such as drugs, weapons, alcohol etc. might be freely available for those who can afford to but them. These goods will therefore reduce the welfare in the society.
5. Firms may disregard the welfare of people, environment and the animals: Firms may, in order to reduce costs, harm the environment, pollute etc. As these things are expensive these might be disregarded completely.

Question 29

What are the ways in which the government can intervene in and economy?(*3)

Answer 29

1. Regulator: they can set maximum and minimum prices, ban/limit the production of certain goods, production standards etc.
2. Producer: They can do DIRECT PROVISION OF GOODS AND SERVICES.
3. Consumer: As they can be a huge consumer of the products they will have a huge negotiation power.

Question 30

What is a Market Failure?

Answer 30

1. Market failure refers to the failure of the forces of Demand and supply in the allocation of resources. When market fail social welfare is not maximised.
2. (ALTERNATIVE) A market failure is when a firm/economy fails to allocate resources efficiently which in turn reduces the social welfare. The cause is negative externalities.

Question 31

What are public goods?

Answer 31

They are goods that are socially and economically desirable which are non-excludable and non-rivalrous. that is, it is impossible to exclude individual consumers from benefiting from them just because they haven’t paid for them and Consumption by one individual would not reduce the amount/ quantity available for the others

Question 32

What are the 3 decision makers in an economy?

What are the aims of each of them?

Answer 32

1. Households: These are the consumers, savers and the workers. As consumers they aim for low priced good quality goods, as workers they need good working conditions and a high pay and as savers they want their money to be safe an d to give a high return.
2. Firms: Produce goods and services and employ factors of productions. As producers of goods and services their main aim is to maximise profits.
3. Government: makes the regulations and the rules for the country, produces a few goods and services, provides financial benefits, collects taxes and regulates the private sector. A governments main aim remains as making the a strong economy. As to add on its aim is also increase the welfare of the economy by taxation etc.

Question 33

What is revenue and how can it be shown graphically?

Answer 33

Revenue= Price* Quantity sold

Graphically it is the area of the rectangle that is from if we draw perpendicular line from the X and Y axis that meets the point on the demand curve.

Question 34

Define Substitutes?

Define Complimentary goods?

Answer 34

Substitutes: Substitutes are goods which can be used instead of each other in order to satisfy a simple want. they can be called as alternatives.

Complimentary goods: they are simply products which are needed to be in demand together in order to satisfy the want. Petrol and Cars are complimentary goods therefore if the price of petrol increases the demand of cars will decrease.

Question 35

What is a direct tax?

Answer 35

Direct tax is the tax one the income of the consumer. Direct taxes reduce the disposable income of the consumer.

Question 36

What is disposable income?

Explain its relation with direct taxes?

Answer 36

Disposable income is the amount of the money the consumers can spend or save after paying direct taxes.
Disposable Income= personal income - direct taxes

Question 37

What are the 5 types of Price Elasticity of Demand graphs?

Answer 37

1. Elastic (Less steep): quantity>price
2. Inelastic (steep): Quantity< Price
3. Unit (45 degree angle): Quantity=Price
4. Perfectly Elastic (perpendicular to Y-axis (Price)): Price remains constant for any quantity
5. Perfectly inelastic: (perpendicular to X-axis (Quantity)): Demand does not change irrespective of the price

Question 38

What are the 5 types of Price Elasticity of Supply graphs?

Answer 38

1. Elastic (Less steep): quantity>price
2. Inelastic (steep): Quantity< Price
3. Unit (45 degree angle): Quantity=Price
4. Perfectly Elastic: (perpendicular to Y-axis (Price)): Price remains constant for any quantity
5. Perfectly Inelastic: (perpendicular to X-axis (Quantity)): Supply does not change irrespective of the price

Question 39

Hoe do markets fail/ What are the causes of market failures?(*7)

Answer 39

1. Public goods will not be provided: This is because usually the private firms cannot charge the consumer. Eg: if they install streetlights they practically cannot charge each individual passing through the light.
2. Too few merit goods will be provided and consumed: If there are few good healthcare centres and school there will be reduces welfare. Good healthcare and education facilities are expensive thus privater firm will focus on the relatively smaller section of the society that can afford it. This in turn will eliminate others form affording it and there will be reduced welfare and more of negative externalities.
3. Demerit goods will be over-supplied and consumed: As demerit goods are generally sold at a high price due to the elasticity, private firms will produce of them in order to increase profits. Smoking can in turn cause passive smoking and other externalities such as dirty streets due to cigarette buds.
4. Due to monopoly practices: If a firm has a monopoly power in a certain region the producer can simply exploit the consumers with high prices, specially if the good is a necessity or a habituated good. This reduces welfare the consumers will then have reduced disposable income that they can spend on other goods and services.
5. Factor immobility obstructs the ability to allocate resources efficiently: This can be an issue. for example there are people with skills that are located far away from the place they are actually needed. this restricts the producers to using the resources efficiently thus reduce=ing the social welfare than that it could have been.
6. Goods and Services with significant external cost may be over provided: SAME AS POINT 3
7. Goods and Services with significant external benefit may be under provided: SAME AS POINT 2

Question 40

Define merit and demerit goods.

Answer 40

1. Merit goods: goods which are normally under-provided by the market mechanism but the society expects it to be provided in more quantities.The reason these goods are under-provided is lack of awareness of consumer, wrong priority or choices, short-term benefits while ignoring long-term.
2. Demerit goods are those goods that are normally over-provided by the market mechanism but the society expects it to be provided in lesser quantities. These goods tend to have negative externalities of consumptions.

Question 41

What is an externality and explain the two types?(*3)

Answer 41

1. Externalities are the effects on the third parties or on the rest of the society. the two types are:
2. External cost: Harmful effects on the rest of the society due to the production or consumption of a good.
3. External benefits: Favourable effects on the rest of the society due to the production or consumption of a good.

Question 42

How to calculate the Total Social Cost and the Total Social Benefit?

Answer 42

1. Total Social Cost = Private Cost + External Cost

2. Total Social Benefit = Private Benefit + External Benefits

Question 43

When is the the situation where there use of resources is uneconomical?
Also explain the situation where there is an economical use fo resources?

Answer 43

1. Uneconomical: This is when the social cost exceeds the social benefit.
2. Economical: This is when the Social benefit exceeds the social costs. In a situation like this the economic welfare will increase.

Question 44

When is the the situation where there use of resources is uneconomical?
Also explain the situation where there is an economical use fo resources?

Answer 44

1. Uneconomical: This is when the social cost exceeds the social benefit.
2. Economical: This is when the

Question 45

What are the benefit software having a government in an economy. How can a government help overcome many of the disadvantages of a free market economic system?(*5)

Answer 45

1. Employ factors of production to produce: Initiate the production of merit goods and public gods the private sector won’t produce because of it being less profitable.
2. Provide welfare benefits: to people who are poor so they can afford the goods and services they need to buy from private firms.
3. Support people who are unemployed:

Question 46

Government Interventions in order to address market failure.(*4)

Answer 46

1. Direct Provision of goods and services: The government can itself produce goods and services
2. Regulations and price controls: Maximum and minimum price.
3. Indirect taxes: implementation of taxes on goods and services in order to raise price and decrease the consumption eg: cigarettes.
4. Subsidies: in order to increase the production of goods the government provides financial help that in turn reduces the cost production and supports the production of the good.

Question 47

Using what methods can a government do direct provision of goods and services?(*2)

Answer 47

1. Nationalisation is a process whereby the Government takes over the ownership of private sector firms. This way the government can now produce goods that are highly desired in the market but are under-produced due to less profits.
2. Or they can simply setup state-owned enterprises which can then employ factors of production directly.

Question 48

What are regulations and how can government use regulation in order to control the market?(*3)

What are price controls and how can government use Price control in order to control the market?(*2)

Answer 48

Regulations are legal rules made b y the government to control the way something is done or the way people or firms behave.They are therefore used to control the forces of demand and supply in regulated markets to produce outcomes that are more socially or economically desirable than those that would otherwise occur.

1. By banning or restricting the production or consumption of goods. eg: The French government announced that will be no use of petrol/diesel cars from 2040 as to reduce the pollution.
2. Regulations regarding the welfare of the animals and the environment: laws and regulations that ban the testing of cosmetics on animals or limiting the firms to dump waste in the river etc .
3. Set minimum acceptable service standards:

Price controls are legal minimum or maximum prices set by the government in the markets for certain goods and services.

1. Maximum prices: these are normally used to set the highest selling price of merit goods and necessities so that people with monopoly power cannot exploit its consumers.
2. Minimum prices: these are used to set prices above the equilibrium prices so that there is reduces consumption of the good. normally imposed on demerit goods.

Question 49

What is an indirect tax?

What is the aim of imposing an indirect tax?

Answer 49

Indirect taxes are taxes that are imposed on the4 producers or the suppliers of specific goods and services. They are an additional cost of production that the private firms must pay to their government. Private firms therefore attempt to pass on the additional cost of these taxes too consumers by raising the price of the product.

It is a method b y which the government can reduce the external cost by the goods and services. Therefore the aim of an indirect tax is to reduce both the consumption and the production of a good/ service.

Question 50

What is a subsidy?(*3)

Towards what type of products are subsidies aimed?

Answer 50

1. A subsidy refers to a financial support or payment provided by the government to private firms in order tot encourage the production. of desirable goods, services and activities.
2. They are usually non-repayable grants, which may include tax reductions, low cost loans etc.
3. Therefore subsidies reduce the cost pot production and increases profits which in turns attracts more producers.

Subsidies are usually targeted at firms that provide products that have significant external benefits or producers that are considered and socially and economically important.

Question 51

What are the problems that can be created due to government interventions?(*7)

Answer 51

1. Government interventions often take a long time to agree and may take even longer to have an impact: Collecting data in order to be able to implement/ draft ideas would take a long time.
2. Price controls may encourage smuggling and black markets
3. Taxes, subsidies and other policy measures can distort price signals and incentives: The implementation of these factors may in turn affect the final price of the good and thus makes it difficult for the producers to understand patterns and the target consumers.
4. Regulation can increase the production costs and prices: Complying which environment laws, employee safety, labour safety, and other regulations could be expensive thus resulting in few goods produced in the sector which will result in high price.
5. Public sector organisations may be inefficient and may produce low quality goods: as the firm will have no profit motive it will not pay attention to cutting costs and thus may be using its resources inefficiently.
6. Government interventions can cause conflict of interest: For example price controls on alcohol will not only have an impact on the consumers but it will affect the revenue earned by restaurants and bars as the demand will go down.
7. Some government interventions may be based on political and personal choices and not the best interest of the society and the economy: Politicians and government officials Amy introduce laws that may be liked by the population but would harm the society. this may be done to attract more people to vote him in the next elections.

Question 52

What is meant by privatisation?

Answer 52

selling off or transferring the state-owned enterprises and public sector activities to private sector firms.

Question 53

Explain each:
Capital intensive production
Labour intensive production

Answer 53

1. Labour intensive production refers to the use of a high proportion of labour relative to capital
2. Capital intensive production refers to the use of a high proportion of capital relative to labour

Question 54

Explain the difference between normal goods and inferior goods and provide one example for each?

Answer 54

Normal good: A product whose demand increases as the income of a consumer increases and the demand decreases as the income of the consumer decreases. Eg: Air Travel bookings

Inferior goods: a Product whose demand decreases as the income of the consumer increases and the demand increases as the income of the consumer decreases. eg: non AC coaches on a train.