What will happen to the equilibrium quantity and equilibrium price of potatoes if the income of potato consumers increases (assume that potatoes are an inferior good) and a new higher-yielding variety of potato plant is developed

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Caden Cherry

Business

9 February, 17:11

What will happen to the equilibrium quantity and equilibrium price of potatoes if the income of potato consumers increases (assume that potatoes are an inferior good) and a new higher-yielding variety of potato plant is developed

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Paulina Thompson · Answer 1

Equilibrium quantity and price will decrease

Explanation:

Inferior goods are the products or services whose demand increases with an increase in price. An Inferior good contracts a normal product whose demand falls with a rise in price. Should consumer's incomes increase, the demand for inferior products and services will decrease.

If potatoes are inferior goods, an increase in incomes will result in a decrease in their demand. The equilibrium quantity will decrease. If and a new higher-yielding variety of potato plant is developed, it will create competition for the inferior potatoes. With an increase in income, consumers tend to prefer 'perceived' high-quality and more costly products. The new higher-yielding variety will be demanded more, which will result in a decline in prices for the inferior potatoes.