Figure 1A.1 :
-Refer to Figure 1A.1. Assume that the graph in this figure represents the demand and supply curves for used cars, which are inferior goods. An increase in income would be represented by a shift from
A) Demand 1 to Demand 2.
B) Demand 2 to Demand 1.
C) Supply 1 to Supply 2.
D) Supply 2 to Supply 1.

Question

Figure 1A.1 : 
-Refer to Figure 1A.1. Assume that the graph in this figure represents the demand and supply curves for used cars, which are inferior goods. An increase in income would be represented by a shift from
A) Demand 1 to Demand 2. 
B) Demand 2 to Demand 1. 
C) Supply 1 to Supply 2. 
D) Supply 2 to Supply 1.

Quizplus · Accepted Answer

Since used cars are considered inferior goods, an increase in income would lead to a decrease in the demand for these goods. This is represented by a shift from Demand 2 to Demand 1, indicating a decrease in demand.