If a producer knew his product to be an inferior good and he also knew average household income was falling,he might
A)decrease output because the demand for his product would rise.
B)increase output because the demand for his product would rise.
C)keep his output the same.
D)cut output immediately because the demand for his product would surely fall.
E)close down,because inferior goods are the first to be eliminated from household budgets when income falls.

Question

Quizplus · Accepted Answer

An inferior good is a good whose demand decreases as consumer income increases. If household income is falling, the demand for inferior goods, such as the producer's product, would rise. Therefore, the producer should increase output to meet the increased demand.

If a Producer Knew His Product to Be an Inferior