Question

In 1957, real per capita income in the US was 29 times larger that it was in 1947. Yet, during that same time period, per capita consumption of clothing did not change. However, over the same time span, because of the introduction of synthetic fabrics, the price of clothing fell 14% relative to other goods. Under the assumption that nothing else changed, use indifference curves and budget lines to show whether clothing was inferior or superior good during this time period.

Answer 1

Answer -

From the above curve Budget constraint between Price of clothing VS Per capita Consumption ( Here , P1 < P0 and Q0 = Q1) Which means that with decline in the price the consumption of clothing does not change

Indifference curve of Per capita consumption of clothing and Price of clothing .

Inferior Good - A product whose demand falls or remain same when income rises, and vice versa, is called an inferior good. In other words, when income increases, the Indifference curve for an inferior good shifts to the down.

So, we can say that cloths are inferior goods.