Suppose Diet Dr. Thunder soda is an inferior good. If the income of consumers increases, how will this affect the demand of Diet Dr. Thunder?

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BlackTom AI · Accepted Answer

The question deals with how a change in income affects the demand for an inferior good. An inferior good is defined as a good for which demand falls as income rises. 
Option 1: 'Shift the demand curve of Dr. Diet Thunder to the right' would imply that demand increases with higher income, which is characteristic of a normal good, not an inferior one, so this is incorrect. 
Option 2: 'Shift the demand curve of Dr. Diet Thunder to the left' accurately reflects that when income increases, consumers buy less of an inferior good, causing the entire demand curve to shift leftward. This matches the standard definition of inferior goods in consumer theory. 
Option 3: 'Increase the quantity demanded of Diet Dr. Thunder' refers to a movement along the demand curve (a change in price would cause a quantity demanded to change), not a shift of the curve due to income. Since the question specifies income change, this option mixes up the concept of a shift with a price-driven movement, making it incorrect. 
Option 4: 'Decrease the quantity demanded of Diet Dr. Thunder' also describes a movement along the curve or a short-term price effect, not the broader shift in demand caused by a change in income. It fails to capture the idea of the entire demand curve moving when income changes. 
In summary, only the leftward shift in the demand curve (option 2) correctly represents how an increase in income affects the demand for an inferior good, while the other options misinterpret the distinction between a shift of the demand curve and movement along a curve, or misattribute the effect to a normal good.

ECON 2002.01 AU2025 (21333) Final Exam- Requires Respondus LockDown Browser

Suppose Diet Dr. Thunder soda is an inferior good. If the income of consumers increases, how will this affect the demand of Diet Dr. Thunder?

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ECON 2002.01 AU2025 (21333) Final Exam- Requires Respondus LockDown Browser

Suppose Diet Dr. Thunder soda is an inferior good. If the income of consumers increases, how will this affect the demand of Diet Dr. Thunder?

View Explanation

Log in for full answers

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