If $x$ is an inferior good and the price of $x$ rises:
A)the substitution effect will induce the consumer to purchase more $x$ and the income effect will induce the consumer to purchase more
$x$ .
B)the substitution effect will induce the consumer to purchase more $x$ and the income effect will induce the consumer to purchase less
$x$ .
C)the substitution effect will induce the consumer to purchase less $x$ and the income effect will induce the consumer to purchase more
$x$ .
D)the substitution effect will induce the consumer to purchase less $x$ and the income effect will induce the consumer to purchase less
$x$ .

Question

Quizplus · Accepted Answer

For an inferior good like $x$, when its price rises, the substitution effect makes consumers want to buy less of $x$ because it has become relatively more expensive compared to other goods. However, the income effect, which reflects a consumer's purchasing power, will lead the consumer to buy more of the inferior good $x$ because as the price of $x$ increases, the real income decreases, making consumers more likely to buy more of the cheaper, inferior good.

If xxx Is an Inferior Good and the Price Of xxx Rises: A)the Substitution Effect Will Induce the Consumer to Purchase

If $x$ Is an Inferior Good and the Price Of $x$ Rises:
A)the Substitution Effect Will Induce the Consumer to Purchase