The income effect of a decrease in the price of potatoes, an inferior good, is a (n):

a. decrease in the demand for onions. increase in the quantity demanded of potatoes.

b. increase in the quantity demanded of onions.

c. decrease in the quantity demanded of potatoes.

d. increase in the demand for potatoes.

Question

Mariam Spence

Business

1 December, 15:22

The income effect of a decrease in the price of potatoes, an inferior good, is a (n):

a. decrease in the demand for onions. increase in the quantity demanded of potatoes.

b. increase in the quantity demanded of onions.

c. decrease in the quantity demanded of potatoes.

d. increase in the demand for potatoes.

+4

Answers (1)

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Marlene Mccullough · Answer 1

The income effect of a decrease in the price of potatoes, an inferior good, is a (n) decrease in the quantity demanded of potatoes.

Explanation:

Those goods for which the demand decreases when the price associated with that good increases. The consumers income and the demand that exists for the inferior goods are inversely proportional to each other. For example wheat can be considered as a normal good but Jowar can be considered as an inferior good.

When the price of any inferior good decreases then the demand of that good will also decrease. In the example given, the inferior good, potatoes prices decreases and this will result decrease in the quantity demanded of potatoes.