Which of the following correctly describes the result of a price increase for an inferior good?
A)Both the substitution effect and the income effect cause the consumer to buy less of the good.
B)The substitution effect causes the consumer to buy less of the good and the income effect causes the consumer to buy more of the good.
C)The substitution effect causes the demand for the good to decrease; the income effect causes the demand for the good to increase.
D)The substitution effect causes the demand for the good to increase; the income effect causes the demand for the good to decrease.

Question

Quizplus · Accepted Answer

For an inferior good, the substitution effect leads to buying less as the price increases, while the income effect leads to buying more because the consumer feels poorer and thus buys more of the inferior good.

Which of the Following Correctly Describes the Result of a Price