An inferior good has a ________ income elasticity of demand and quantity demanded ________ as income rises.
A)negative; increases
B)negative; decreases
C)positive; increases
D)positive; decreases

Question

Quizplus · Accepted Answer

An inferior good is a good that has a negative income elasticity of demand, which means that as income rises, the quantity demanded of the good decreases. This is because consumers tend to shift to higher quality goods as their income increases, making the inferior good relatively less attractive. Therefore, the correct option is B, where the income elasticity of demand is negative and the quantity demanded decreases as income rises.

An Inferior Good Has a ________ Income Elasticity of Demand