Good X is an inferior good but not a Giffen good. When the price of X increases, the consumer will consume
A)more X.
B)the same amount of X.
C)less X.
D)more or less X depending on the size of the income effect relative to the size of the substitution effect.

Question

Quizplus · Accepted Answer

An inferior good is one for which demand decreases as income increases, while a Giffen good is one for which demand increases as price increases. When the price of X increases, the consumer will face a higher opportunity cost of consuming X and therefore will choose to consume less of it. Therefore, the correct answer is C.

Good X Is an Inferior Good but Not a Giffen