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.

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