"Running head: ECONOMICS FOR MANAGERSEconomics for managerName of the studentName of the UniversityAuthor note:ECONOMICS FOR MANAGERS1Introduction:As argued by Kubler, Selden & Wei (2013), when the income of the person rises, thedemand for the normal good increases, whereas, the demand for the inferior good decreases.In specifically, when people have more money, they avoid consuming the inferior good.Thus, the less consumption of inferior good indicates not only the reason of poor quality butalso the affordability. However, during the recession period, people want to consume less,and they choose inferior good instead of normal good (Dziadkiewicz, Pisani & Wong, 2015).In this research essay, the impact of the recession on normal and inferior good hasbeen analyzed. Apart from this, the condition and impact of revenue regarding inferior goodby economic depression and expansion have also been critically evaluated. In thisperspective, the relation of the income elasticity of demand with the recession has beenstated. Discussion:According to Chen, Peng & Hung (2015), the income elasticity of demand (e ) can bem defined as the percentage change in quantity demanded in respect to the percentage change inincome. In the case of normal good, higher income raises the quantity demanded, and theincome elasticity is positive (e > 0). On the contrary, for inferior good, higher income lowersm the quantity demanded (Mark, Southam, Bulla & Meza, 2016). When the income of aconsumer rises, the person is more likely to take a taxi or car ride rather than a bus ride. Now,the bus ride is inferior to him. As a result, the income elasticity of demand is negative forinferior good (e < 0).mECONOMICS FOR MANAGERS2Figure 1: Income elasticity of demand for inferior goodSource: (As created by author)According to this figure, to the right of the point G, X is an inferior good to theconsumer as e < 0 in this case. m On the contrary, the situation has reversed during the period of recession. In the wordsof (Schild, Fricke & Neugebauer, 2013), during the recession period, the incomes of thepeople fall, and as a result, the people want to consume less to save money. Thus, most of thepeople choose inferior good instead of normal good. In this meanwhile, people want tosubstitute the expensive goods to cheaper goods for decreasing their consumption level(Dziadkiewicz, Pisani & Wong, 2015).Moreover, when the economy faces the depression or recession period, the income ofthe people falls, and the people have a smaller amount of money for consumption purpose.As a result, for the normal good, a recession of the economy shifts the demand curvedtowards the left (Allgrunn & Weinandt, 2016).ECONOMICS FOR MANAGERS3Figure 2: Shift of the demand curve for normal goodSource: (As created by author)However, for the inferior good, a depression in the economy shifts the demand curveupwards. This situation indicates the fact that people want to buy more inferior good insteadof normal good. In addition, they substitute the most expensive good to the less expensiveone (Kubler, Selden & Wei, 2013).ECONOMICS FOR MANAGERS4Figure 3: Shift of the demand curve for an inferior goodSource: (As created by author)On the other hand, as per the view of Dziadkiewicz, Pisani & Wong (2015), duringthe period of economic recession, people receive a lower amount of money as well asincome. As a result, total revenue increases in the economy. On the contrary, when economicexpansion presents in the economy, people receive a higher amount of money (Chen, Peng &Hung, 2015). This situation leads to the decrease in total revenue in the economy. In this perspective, it can be notified that though the recession is bad for the economy,it has a positive effect. As opined by Mark, Southam, Bulla & Meza (2016), during therecession period, the natural tendency of the people is to save more money which leads to thesituation of economic growth. Moreover, this positive tendency lowers the amount of debtand the debt seeking attitude is also minimized from the mind of the people. In addition, moremoney is available in the economy which can be used for the investment purpose. It indicatesthe fact that the banks have a huge amount of money which they invest for boost up theeconomy (Schild, Fricke & Neugebauer, 2013). Thus, the revenue of the economy goes up inthe recession period. On the other hand, the contradictory nature is seen during the expansion period of theeconomy. In the words of Allgrunn & Weinandt (2016), when the expansion period exists inthe economy, people want to spend more amount of money instead of saving. As a result, lessamount of money is available to the banks for investment purpose. This situation leads to thelower amount of revenue in the economy. Moreover, in this perspective, it can be deducedthat inferior good can be able to raise the amount of revenue during the recession period(Mark, Southam, Bulla & Meza, 2016).ECONOMICS FOR MANAGERS5In the context of food item which is a necessary good, the income elasticity is lessthan one. It is also an inferior good. Thus, during the recession period, the demand forrestaurant services decreases which is a normal good whereas, demand for grocery storesincreases which is an example of an inferior good. By the same logic, Wal-Mart is an inferiorgood and Target is normal.Conclusion:By the above critical analysis of the impact of the recession on the economy, it can beconcluded that inferior good is more effective to raise the amount of revenue to compare tonormal good. In the recession period, people want to consume more amounts of inferior goodand less of a normal good. Moreover, the income elasticity of demand is also negative for theinferior good. However, it has a positive effect on the economy during the recession period.In this perspective, people prefer to choose less expensive or inferior good and save a hugeamount of money. As a result, banks have a lot of money which are used for the investmentpurpose. This situation boosts up the economy which leads to the economic growth of thecountry. On the other hand, during the period of economic expansion, people want to spendmore which leads to reduction in the amount of revenue. "