An increase in income will
A) always increase the demand for turnips.
B) increase the demand for turnips if turnips are inferior goods.
C) increase the supply of turnips.
D) increase the demand for turnips if turnips are normal goods.
E) decrease the demand for turnips if turnips have a very low price.

Question

Quizplus · Accepted Answer

If turnips are normal goods, an increase in income will lead to an increase in demand for turnips, as people have more purchasing power to buy them. However, if turnips are inferior goods, then an increase in income may decrease the demand for turnips as people may switch to higher quality goods. A change in income does not affect the supply of turnips, so choices A and C are incorrect. Choice E is also incorrect as an increase in income would generally not decrease demand for a good, regardless of its price.

An Increase in Income Will