Assume that white bread is an inferior good. During a recession, a ﬁrm that produces white bread is likely to _____.
A) exit the bread market and produce cakes and scones
B) increase the quantity of bread supplied to the market
C) also start selling organic bread, a luxury good, at high prices
D) reduce the output of bread and increase prices

Question

Quizplus · Accepted Answer

Inferior goods are those for which demand increases when consumer income decreases. During a recession, consumers have less income and tend to buy more inferior goods like white bread. Therefore, a firm producing white bread is likely to increase the quantity supplied to meet the higher demand.

Assume That White Bread Is an Inferior Good