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 keros

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Q: 87 (CDS-II/2015)
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_subject: 

Economics

question_exam: 

CDS-II

stats: 

0,39,39,39,15,8,16

keywords: 

{'less kerosene': [0, 0, 0, 1], 'kerosene': [2, 2, 3, 2], 'inferior good': [0, 0, 0, 2], 'subsidies': [1, 0, 0, 1], 'india': [8, 1, 7, 13], 'decline': [1, 0, 4, 11], 'households': [0, 1, 2, 7], 'government': [5, 0, 0, 1]}

The correct answer is option 1, "1 only". This implies that as households in India become wealthier, their demand for kerosene decreases.

An inferior good is one for which demand decreases as consumer income increases. As households in India get richer, they are able to afford alternative sources of energy, such as electricity or gas, which are considered to be superior goods. Therefore, their consumption of kerosene, which is an inferior good, decreases.

The implications of kerosene being an inferior good in India are that as households get wealthier, they are likely to consume less kerosene. This has implications for policymakers and the government, as they may need to consider reducing subsidies on kerosene as the demand for it decreases.

It is important to note that the other options (2 and 3) are not correct. There is no indication in the question that there is a decline in the quality of kerosene over time. Similarly, there is no direct implication stated regarding the need for the government to stop subsidies on kerosene.