Consider a two-good world,with commodities X and Y.If X is an inferior good,then an increase in consumer income cannot:
A) decrease the demand for Y.
B) increase the demand for Y.
C) decrease the demand for X.
D) make the consumer better off.

Question

Quizplus · Accepted Answer

An inferior good is one for which demand decreases as income increases. Therefore, an increase in consumer income would translate to a decrease in demand for X, but it cannot increase the demand for Y, since Y is a separate good. Similarly, an increase in income cannot make the consumer better off, as they are experiencing a decrease in demand for a good they prefer. However, an increase in income does not necessarily mean that demand for Y will decrease, so option A is the best answer.

Consider a Two-Good World,with Commodities X and Y