Suppose the income of buyers in a market for an inferior good decreases and a technological advancement occurs also. What would we expect to happen in the market?

Question

Oliver Duran

Business

7 January, 19:52

Suppose the income of buyers in a market for an inferior good decreases and a technological advancement occurs also. What would we expect to happen in the market?

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Answers (1)

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Harper Chung · Answer 1

Demand for the inferior good will reduce substantially.

Explanation:

Two reasons will push the demand for the inferior commodity down.

The demand for inferior goods is elastic. It means a small increase in prices or a decline in the purchasing power of buyers will have a significant impact on the quantities ordered. Incomes of the buyers have reduced. Inferior goods are not necessities. If people cannot afford them, they will look for alternatives. In this situation, the inferior products will experience a decrease in demand. The emergence of technological advancement implies the availability of superior goods at an affordable price. The better, low-priced product will have an advantage over the inferior goods in the market. The demand for the new product will increase while that of the inferior product will fall.