Question

What would happen to the new resulting equilibrim price and quantity and quantity of Ramen noodles (inferior good), if incomes for US workers fell by 8% over the next two years?

a. P would be higher, Q would be higher

b. P would be higher, Q would be lower

c. P would be lower, Q would be lower

d. P would be lower, Q would be higher

Answer 1

a. P would be higher, Q would be higher

An income and demand for an inferior good are negatively related. the income fall means demand increase.

the demand for Ramen noodles increases and shifts the demand curve to the right. it increases the price and quantity of Ramen noodles in the new equilibrium.

The ramen noodles price and quantity will increase.

An inferior good is a cheap good which is brought up to an income level. A consumer shifts to high-quality food after an increase in income and low quantity food after a decrease in income. An inferior good means a low quality good or service.