Soup is an inferior good if the demand

Question

BlackTom AI · Accepted Answer

The question asks about when soup is considered an inferior good, based on how its demand responds to changes in income.
Option 1: 'curve for soup slopes upward.' An upward-sloping demand curve would imply that quantity demanded increases as price increases, which contradicts the basic law of demand and does not address income changes. This option confuses the price–quantity relationship with income effects, so it is incorrect.
Option 2: 'for soup falls when the price of a substitute for soup rises.' When the price of a substitute rises, consumers typically switch to the cheaper alternative, increasing demand for the original good, not decreasing it. This statement describes a substitution effect linked to price, not the income effect that defines inferior goods, so it is incorrect.
Option 3: 'for soup falls when income rises.' This aligns with the definition of an inferior good: as income increases, demand for the inferior good decreases. The negative income elasticity of demand explains why this option correctly identifies a characteristic of inferior goods, so it is correct.
Option 4: 'for soup rises when the price of soup falls.' This describes the basic law of demand for normal goods in terms of own-price changes, not how demand responds to income. It does not address income changes and is therefore incorrect in the context of defining an inferior good.

Soup is an inferior good if the demand

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Soup is an inferior good if the demand

View Explanation

Log in for full answers

Similar Questions

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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If the economy goes into a recession and incomes fall, what happens in the markets for inferior goods?

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