Answer:
(i) Inferior goods are those goods whose demand falls with the increment in income of consumers. This is because when income rises the consumers want superior goods than before. Those goods which are affected negatively are called inferior goods. Normal goods are those goods whose demand increases with the increment in income and vice-versa. In short, when income increases the demand of normal goods increases and the demand of inferior goods decreases. (ii) Cardinal Utility means the utility derived from units can be measured in numerical terms. Such as utility from first unit consumed is 8, from the unit consumed is 6 etc. Unit analysis approach explains consumer?s behaviour which is based on cardinal approach. Ordinal Utility approach explains the consumer?s behavior in the case of preferences of the combination of two commodities instead of adopting cardinal utility approach. Indifference curve approach is basically based on ordinal approach because the fact that indifference curves express the level of satisfaction of the consumers which may be more or less. It cannot be measured in numerical terms.
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