Which of the following factors would decrease the demand for inferior goods? An increase in consumer income A decrease in consumer income A decrease in the price of normal goods An increase in the price of normal goods
Question
Which of the following factors would decrease the demand for inferior goods? An increase in consumer income A decrease in consumer income A decrease in the price of normal goods An increase in the price of normal goods
Solution
An increase in consumer income would decrease the demand for inferior goods. Here's why:
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Inferior goods are goods that consumers buy less of as their income increases. They are the opposite of normal goods, which are goods that consumers buy more of as their income increases.
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When consumers have more income, they have more purchasing power. This means they can afford to buy more expensive goods, or normal goods.
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As a result, they will buy less of the inferior goods because they can now afford better alternatives.
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Therefore, an increase in consumer income would decrease the demand for inferior goods.
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