When the price of a product rises for an inferior good, the
A) income and substitution effects will encourage consumers to purchase more of the product.
B) income and substitution effects will encourage consumers to purchase less of the product.
C) substitution effect will encourage consumers to purchase less of the product, but the income effect will encourage them to purchase more.
D) substitution effect will encourage consumers to purchase more of the product, but the income effect will encourage them to purchase less.

Question

Quizplus · Accepted Answer

For an inferior good, the substitution effect leads consumers to buy less as the price rises, but the income effect may lead them to buy more because their real income effectively decreases, making the inferior good more attractive.

When the Price of a Product Rises for an Inferior