If a good is inferior and demand is downward sloping, then:
A)the substitution effect is equal to the income effect.
B)the substitution effect is larger than the income effect.
C)price and quantity demanded move in the same direction.
D)the substitution effect is smaller than the income effect.

Question

Quizplus · Accepted Answer

For an inferior good with a downward-sloping demand, the substitution effect (which always leads to an increase in quantity demanded when price falls) is larger than the income effect (which leads to a decrease in quantity demanded for inferior goods when income increases).

If a Good Is Inferior and Demand Is Downward Sloping