Georgette was making $4,000 per month, but her work cut her hours, so she is now making $2,500 per month. What do you expect to happen to Georgette's demand curve for powdered cheese (an inferior good) as a result of this income change?

Question

Urijah Hayden

Business

14 March, 10:48

Georgette was making $4,000 per month, but her work cut her hours, so she is now making $2,500 per month. What do you expect to happen to Georgette's demand curve for powdered cheese (an inferior good) as a result of this income change?

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Answers (1)

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Roxie · Answer 1

The demand curve of an inferior good increase when the income decrease.

Explanation:

Georgette will decrease their demand for normal goods and move towards inferior goods. So the powdered cheese among other inferior goods demand will increase for her.

Inferior goods have a negative income elasticity, which means their demand drop when income rises and increases when income drops.

If she takes another job or receives her hours back, Georgette will be more willing to spend on more costly substitutes. Decreasing their demand for inferior goods.