Question

If the income of buyers increases and good A is an inferior good, the blank will...

If the income of buyers increases and good A is an inferior good, the blank will blank . This will cause the equilibrium price to blank and the equilibrium quantity to blank .

Homework Answers

Answer #1

Normal good is that good which has positive income elasticity. It means with the increase in the income, the quantity demand for the normal good increases.

On the other hand, inferior good has negative income elasticity. It means with the increase in the income, the quantity demand for the inferior good decreases.

If the income of buyers increases and good A is an inferior good, the demand of this good will decrease . This will cause the equilibrium price to decrease and the equilibrium quantity to decrease .

This is because when income increases, the demand for the inferior good decreases, so the demand curve shifts leftward, so the equilibirum price decreases and quantity also decreases.

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Good A (an inferior good) and Good B (a normal good) are viewed by consumers to...
Good A (an inferior good) and Good B (a normal good) are viewed by consumers to be substitute products. Suppose that the price of Good B falls at the same time that consumer income increases. What is the net effect of these two events on equilibrium in the market for Good A? a. an increase in equilibrium quantity and an indeterminate effect on price b. a decrease in both the equilibrium price and quantity c. an indeterminate effect on quantity...
If the demand for noodles increases as income decreases, noodles are Select one: a. inferior good....
If the demand for noodles increases as income decreases, noodles are Select one: a. inferior good. b. complementary good. c. substitute good. d. normal good.
When the price of an inferior good falls, the substitution effect contributes to a(n) _____ in...
When the price of an inferior good falls, the substitution effect contributes to a(n) _____ in the quantity demanded, and the income effect _____ the substitution effect. decrease; reinforces decrease; opposes increase; reinforces increase; opposes I know that the substitution effect will cause an increase in the quantity demanded. However, does the fact that it is an inferior good effect it? Also, the would the income effect reinforce the substitution effect?
Suppose good A is an inferior good. Suppose good B is a normal good. Suppose good...
Suppose good A is an inferior good. Suppose good B is a normal good. Suppose good A and good C are substitutes. Suppose good B and good D are complements. Suppose there exists an effective price floor in the market for good A. If the GDP increases in this economy, which of the following statement best describes the situation? The market quantity of good A remains unchanged. The market quantity of good A decreases. The market price of good A...
Suppose that demand for a good increases and, at the same time, supply of the good...
Suppose that demand for a good increases and, at the same time, supply of the good decreases. What would happen in the market for the good? a. Equilibrium quantity would decrease, but the impact on equilibrium price would be ambiguous. b. Equilibrium price would decrease, but the impact on equilibrium quantity would be ambiguous. c. Equilibrium quantity would increase, but the impact on equilibrium price would be ambiguous. d. Equilibrium price would increase, but the impact on equilibrium quantity would...
Consider the market for good x (good x is an inferior good), now let’s assume that...
Consider the market for good x (good x is an inferior good), now let’s assume that household income has risen in the overall economy while at the same time the price of good y has increased. Good x and y are substitutes in production. What will be the overall effect on equilibrium price and quantity? Hint: do not use a graph.
Suppose the price of milk increases and at the same time, the incomes of cheese buyers...
Suppose the price of milk increases and at the same time, the incomes of cheese buyers decrease. Milk is an input in the production of cheese. In addition, we also know that cheese is a normal good. As a result, in the market for cheese Group of answer choices 1.the equilibrium quantity rises and the equilibrium price may increase, decrease, or stay the same. 2.the equilibrium price rises and the equilibrium quantity may increase, decrease, or stay the same. 3.the...
1. If the demand for good X increases by 20% when income increases by 40%, we...
1. If the demand for good X increases by 20% when income increases by 40%, we can say that: a. income elasticity is 2, and the good is an inferior good b. income elasticity is 2, and the good is a normal good c. income elasticity is 1/2, and the good is a normal good d. income elasticity is 1/2, and the good is an inferior good 2. A monopoly has the following data: P=$10, MR = $6 MC =...
Questions 8-10 are parts of this question: Suppose good X is inferior and good Y is...
Questions 8-10 are parts of this question: Suppose good X is inferior and good Y is normal, and the price of good Y increases (income and the price of good X remain unchanged). a) Describe how the consumer’s budget constraint will change. (Hint: drawing the new and old budget constraints should help you). (2) As a result of this price change, will the quantity of good Y increase, decrease or will the direction of change be ambiguous? Support your answer...
1-As we move up the demand curve, the price elasticity of demand * A) increases B)...
1-As we move up the demand curve, the price elasticity of demand * A) increases B) decreases C) becomes unitary D) does not change 2-If the price of lemonade increases relative to the price of grape juice, the demand for: * A) grape juice will decrease. B) grape juice will increase. C) lemonade will decrease. D) lemonade will increase. 3-An increase in price will result in no change in total revenue if: * A) the percentage change in price is...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT