Question

If a rational utility maximizer is a net demander of a good and if an increase in its price causes him to buy more of it, then it must be an inferior good.

This is a True or Fale problem. And the answer is True. I wanna know how to draw graph, and what is net demander.

Answer 1

The answer is false.

It is not an inferior good, rather it's a GIFFEN good.

Bcoz if price rise & demand rise, then it implies that demand curve is upward sloping.

For inferior good, demand curve always slopes downwards.

Only for Giffen good, demand curve is upward sloping.

Net demander imply that consumer is demanding the goods only, & not selling the goods .

Graph ;

Where as for inferior good, price rise, Consumption falls.

The relevant graph