Figure: Price and Quantity 4 If the figure depicts a market for an inferior good,which of the following statements describes what could have happened?
A) Consumer income increased,causing an increase in demand and an increase in supply.
B) Consumer income decreased,causing an increase in demand and an increase in quantity supplied.
C) The price of a substitute good increased,causing an increase in quantity demanded and an increase in quantity supplied.
D) Consumers expect lower future prices,causing an increase in demand and an increase in supply.

Question

Figure: Price and Quantity 4  If the figure depicts a market for an inferior good,which of the following statements describes what could have happened?
A) Consumer income increased,causing an increase in demand and an increase in supply. 
B) Consumer income decreased,causing an increase in demand and an increase in quantity supplied. 
C) The price of a substitute good increased,causing an increase in quantity demanded and an increase in quantity supplied. 
D) Consumers expect lower future prices,causing an increase in demand and an increase in supply.

Quizplus · Accepted Answer

An inferior good is a good for which an increase in income leads to a decrease in demand. Therefore, if the figure depicts a market for an inferior good and the price and quantity have both increased, it implies that the consumer income has decreased and they are buying more of the inferior good. In this case, the supply has also increased to meet the higher demand. This corresponds with choice B, which states that a decrease in consumer income leads to an increase in demand and an increase in quantity supplied.

Figure: Price and Quantity 4 If the Figure Depicts