For inferior goods the income effect is:
A)unrelated to the price.
B)negatively related to the price.
C)positively related to the price.
D)ambiguously related to the price.

Question

Quizplus · Accepted Answer

For inferior goods, as income increases, the quantity demanded decreases. When the price of an inferior good decreases, the consumer feels richer, leading to a decrease in demand due to the negative income effect. Thus, the income effect is positively related to the price.

For Inferior Goods the Income Effect Is