If a decrease in income increases the demand for a good, then the good is

Question

BlackTom AI · Accepted Answer

The question asks about the classification of a good for which demand rises when income falls. This behavior is the defining characteristic of an inferior good.

To understand this, recall the basic income-demand relationship:
- Inferior goods: when income decreases, consumers switch to buying more of these goods, so quantity demanded goes up as income falls.
- Normal goods: when income decreases, demand for these goods typically falls as well, or at least does not rise due to income alone.
- The substitution effect can also influence demand, but for inferior goods the income effect dominates in the sense described: lower income makes the inferior good more attractive relative to more expensive substitutes.

In this case, since the prompt states that a decrease in income increases demand for the good, the appropriate classification is inferior good. This behavior is inconsistent with normal goods, for which a decrease in income would generally reduce demand, not increase it. It also does not imply any special cases like Giffen goods unless the price and income effects interact in a particular way, which is not specified here.

If there were alternative options, the key distinctions would be:
- Inferior good: demand rises when income falls.
- Normal good: demand falls when income falls.
- Giffen good: a special case where a price rise leads to higher demand due to income/price effects, a different scenario entirely.
- Luxury or luxury-normal goods: typically associated with higher income leading to higher demand, not the converse.

Overall, the statement provided matches the standard definition of an inferior good, given the described income-demand relationship.

If a decrease in income increases the demand for a good, then the good is

查看解析

登录即可查看完整答案

类似问题

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?

Soup is an inferior good if the demand

Due to a tuition rise, most students at a college find themselves with less disposable income. As a result, most of them eat more frequently at the school cafeteria and less often at restaurants.

Assume that store brand cereal is an inferior good. If income rises, then the price of store brand cereal will__ and the quantity sold of store brand cereal will _.

Suppose that -holding prices and other exogenous factors constant- an increase in income causes Alyssa's demand for rice to fall. Then,

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