The demand curve for canned peas is downward sloping.If the price of canned peas, an inferior good, rises, then
A)the income effect which causes you to reduce your canned peas purchases is smaller than the substitution effect which causes you to increase your purchases, resulting in a net increase in quantity demanded.
B)the income effect which causes you to increase your canned peas purchases is smaller than the substitution effect which causes you to reduce your purchases, resulting in a net decrease in quantity demanded.
C)both the income and substitution effects reinforce each other to decrease the quantity demanded.
D)the income and substitution effects offset each other but the price effect of an inferior good leads you to buy more canned peas.

Question

Quizplus · Accepted Answer

Since canned peas are an inferior good, as the price of canned peas rises, people will seek substitutes for it, resulting in the substitution effect causing a decrease in the quantity demanded. Meanwhile, the income effect, which is the decrease in the purchasing power due to the increase in price, results in people buying less of the inferior good. Thus, both effects work to decrease the quantity demanded of canned peas, and the net result is a decrease in quantity demanded. Therefore, option B is correct.

The Demand Curve for Canned Peas Is Downward Sloping