Total Marks 5

Starting Date Friday, May 28, 2021

Closing Date Thursday, June 03, 2021
Status Open
Question Title Consumer Behavior: Consumption side analysis
Question Description
In year 2020, Pakistan faced the deadliest of the natural calamities in form of
locust attack. Due to this the agriculture sector faced a loss of almost 353
billion rupees. Both the winter and summer crops were damaged partially, and after
many years the Government of Pakistan decided to import the food items, to maintain
the market price. In this background let�s assume, two groups, A and B are living
in the country, with certain rational behavior towards the commodity prices of
essential food items like wheat. Both groups have different opinion about wheat.
People from group A consider wheat as a staple food, while people from group B
consider it as a normal good. During the last month due to the fall in the
commodity prices, it was observed, that people from group A, decreased their demand
for wheat, where as people from group B increased their demand for wheat.

Requirement:

Which type of product is wheat for people from group A and people from group B?

What will be the income effect for the people from group A?

Requirement: 01
Which type of product is wheat for people from group A and people from group B?
First of all, i will define two forms such as:
Giffen product:
Giffen products are defined as the the goods whose demand increase as the price
increase and demand decrease as the price decrease.
Substitute product:
Substitute products are those goods that can be easily replaced with another good.
here we come to know that people from group A has decreases demand for wheat as
commodity price deacreased so, its justified that for group A wheat is giffen
product. And wheat is substitute product for group B.

Requirement: 02

What will be the income effect for the people from group A?

First of all, i will define income effect:

Income effect is defined as change in demand for good caused by change in consumer
income.

An inverse relationship will be represented by downward sloping line frome left to

right beacuse demand decreased as price decreased. So they have fall demand as the
price decreased but their income increased.