For a demand curve to be upward sloping, the good would have to be an inferior good, and
A)the income effect would have to be larger than the substitution effect.
B)the income effect would have to be smaller than the substitution effect.
C)the income effect would have to be equal to the substitution effect.
D)the income effect and the substitution effect would have to be nonexistent.

Question

Quizplus · Accepted Answer

If the good is inferior, then as income increases, consumers will tend to buy less of the good and switch to higher quality substitutes. This means that the income effect (which leads to a decrease in quantity demanded as income increases) will be greater than the substitution effect (which leads to an increase in quantity demanded as the price of the good decreases). This results in an upward sloping demand curve. Option A correctly describes this relationship.

For a Demand Curve to Be Upward Sloping, the Good