What will be the income effect on an inferior good if there is an increase in the income of the consumer?The quantity demanded will increaseThe quantity demanded will decreaseThe quantity demanded will remain unchangedThe quantity demanded could either increase or decrease
Question
What will be the income effect on an inferior good if there is an increase in the income of the consumer?The quantity demanded will increaseThe quantity demanded will decreaseThe quantity demanded will remain unchangedThe quantity demanded could either increase or decrease
Solution
The quantity demanded will decrease.
Here's why: Inferior goods are those goods that consumers buy less of as their income increases. This is because as income increases, consumers can afford to buy more expensive substitutes or higher quality goods. So, when there is an increase in the income of the consumer, the demand for the inferior good decreases. This is known as the income effect.
Similar Questions
How does an increase in income affect the demand for an inferior good? Demand increases. Demand decreases. Demand remains the same. The effect on demand cannot be determined.
18. How does a change in income affect demand for inferior goods?
Inferior Good - A good that increases demand when consumer income decrease.Question 4AnswerTrueFalse
What distinguishes a Giffen good from other inferior goods?The demand decreases with a decrease in priceThe demand increases with an increase in priceThe demand decreases with an increase in incomeThe demand increases with a decrease in income
Inferior goods are characterized by ________ demand as a result of increased income.Multiple Choiceslightly higherlowerno change insignificantly higher
Upgrade your grade with Knowee
Get personalized homework help. Review tough concepts in more detail, or go deeper into your topic by exploring other relevant questions.