If Max experiences a decrease in his income,then we would expect Max's demand for
A)each good he purchases to remain unchanged.
B)normal goods to decrease.
C)luxury goods to increase.
D)inferior goods to decrease.

Question

Quizplus · Accepted Answer

If Max experiences a decrease in income, his purchasing power decreases as well. As a result, he will likely decrease his demand for normal goods, which are goods that people buy more of as their income increases. Max may switch to cheaper brands or find substitutes for the goods he previously purchased. However, his demand for inferior goods, which are goods that people buy more of as their income decreases, may actually increase. Luxury goods, on the other hand, are not necessities and are usually high-end goods that are typically purchased by individuals with higher incomes. Therefore, it is unlikely that Max's demand for luxury goods will increase with a decrease in income.

If Max Experiences a Decrease in His Income,then We Would