The price of potatoes falls,and the quantity of potatoes purchased decreases.What can we infer?

Question

Quizplus · Accepted Answer

When the price of potatoes falls, normally, we would expect consumers to buy more due to the substitution effect (potatoes are cheaper relative to other goods) and the income effect (consumers feel richer because their purchasing power has increased). However, if the quantity purchased decreases, it suggests that the income effect (which in this case is negative, as consumers are buying less) exceeds the substitution effect. This scenario is unusual for normal goods and might indicate that potatoes are an inferior good in this context, where increased purchasing power leads consumers to buy less of the cheaper good and more of other goods.

The Price of Potatoes Falls,and the Quantity of Potatoes Purchased