If potatoes are an inferior good and the price of potatoes decreases,the _____ effect(s)will cause a(n)_____ in the consumption of potatoes.
A) substitution;decrease
B) income;increase
C) income;decrease
D) substitution and income;decrease

Question

Quizplus · Accepted Answer

When potatoes are an inferior good, as the price of potatoes decreases, the income effect will cause a decrease in the consumption of potatoes. This is because people tend to switch to better-quality food as their income increases, and vice versa. Therefore, the decrease in price will make potatoes even more inferior and people will shift to better-quality food, leading to a decrease in the consumption of potatoes.

If Potatoes Are an Inferior Good and the Price of Potatoes