Figure: Price and Quantity 4 If the figure depicts a market for an inferior good, which of the following statements describes what could have happened?
A) Consumer income increased, causing an increase in demand and an increase in supply.
B) Consumer income decreased, causing an increase in demand and an increase in quantity supplied.
C) The price of a substitute good increased, causing an increase in quantity demanded and an increase in quantity supplied.
D) Consumers expect lower future prices, causing an increase in demand and an increase in supply.

Question

Figure: Price and Quantity 4  If the figure depicts a market for an inferior good, which of the following statements describes what could have happened?
A) Consumer income increased, causing an increase in demand and an increase in supply. 
B) Consumer income decreased, causing an increase in demand and an increase in quantity supplied. 
C) The price of a substitute good increased, causing an increase in quantity demanded and an increase in quantity supplied. 
D) Consumers expect lower future prices, causing an increase in demand and an increase in supply.

Quizplus · Accepted Answer

If the figure depicts a market for an inferior good, a decrease in consumer income would lead to an increase in demand and an increase in quantity supplied. This is because inferior goods are typically lower-quality, cheaper alternatives to other goods, meaning that as consumer income decreases, they may switch to purchasing more of the inferior good instead of other, more expensive options. This would lead to an increase in demand for the inferior good, and an increase in quantity supplied by producers to meet that demand.

Figure: Price and Quantity 4 If the Figure Depicts