If the substitution effect of a lowered price is partly or fully offset by the income effect,we know that the good in question is a(n)
A)complementary good
B)inferior good
C)luxury good
D)normal good
E)substitute good

Question

Quizplus · Accepted Answer

An inferior good is a good for which demand decreases as income increases. When the price of an inferior good decreases, the income effect may make consumers feel like they have more money to spend, leading them to shift their consumption towards better quality goods. As a result, the substitution effect of the price decrease is offset by the income effect.

If the Substitution Effect of a Lowered Price Is Partly