When the price of an inferior good falls,the substitution effect contributes to a(n)_____ in the quantity demanded,and the income effect _____ the substitution effect.
A)decrease;reinforces
B)increase;reinforces
C)increase;opposes
D)decrease;opposes

Question

Quizplus · Accepted Answer

For an inferior good, when the price falls, the substitution effect leads to an increase in quantity demanded. However, the income effect, which occurs because the consumer feels effectively richer, opposes the substitution effect, as the consumer may buy less of the inferior good.

When the Price of an Inferior Good Falls,the Substitution Effect