Question

As the economy recovers from a recession, we should expect that the: a. ​demand for both...

As the economy recovers from a recession, we should expect that the:

a.

​demand for both inferior and normal goods will fall.
b.

​demand for inferior goods will fall and the demand for normal goods will rise.
c.

​demand for both inferior and normal goods will rise.
d.

​demand for inferior goods and normal goods will remain the same.
e.

​demand for inferior goods will rise and the demand for normal goods will fall.
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Answer #1

As we know, when the economy recovers from a recession, it implies that the output level in the economy is increasing and when the output level in the economy is increasing then the income level also increases, therefore, we can say that due to the increase in the income demand for inferior goods will fall and the demand for normal goods will rise. So, the right answer is option B. Remember, when the income increases the demand for inferior goods will fall and the demand for normal goods will rise.

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