The income effect of a decrease in the price of potatoes (an inferior good)is a(n)

Question

Quizplus · Accepted Answer

A decrease in the price of an inferior good leads to an increase in the purchasing power of consumers, resulting in higher demand for normal goods and lower demand for inferior goods. Since potatoes are an inferior good, a decrease in their price will result in a decrease in the quantity demanded of potatoes, as consumers will shift their demand towards normal goods. Therefore, the correct answer is B, a decrease in the quantity demanded of potatoes.

The Income Effect of a Decrease in the Price of Potatoes