Question

If the economy enters a recession, the demand for inferior goods will a. Increase more than...

If the economy enters a recession, the demand for inferior goods will

a. Increase more than the decline in income during the recession

b. Increase less than the decline in income during the recession

c. Increase by the same magnitude in the decline in income during the recession

d. Decline

e. Not change at all

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Answer #1

Answer. (a) Increase more than the decline in income during the recession

Explanation: During a recession, many people get unemployed or experience a sharp decrease in their incomes. So many families would aim to save their money for emergency and future purposes, keeping in mind that their incomes have stopped for a while. So, they might switch to inferior goods to save money. This increase in inferior goods might be more than the decline in income due to negative expectations about the future prospects, which would force the household thoughts to change drastically.

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