Sia
Question
Statistics
Posted 5 months ago
Assume that milk is an inferior good.
Assuming all other factors remain constant, if the income of milk buyers increases, what will happen to the equilibrium price and quantity of milk?
Choose 1 answer:
(A) We cannot determine what happens to price, but quantity will increase
(B) Price will increase, but we cannot determine what happens to quantity
(C) Price will decrease and quantity will decrease
(D) Price will decrease and quantity will increase
(E) Price will increase and quantity will decrease
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Answer from Sia
Posted 5 months ago
Solution by Steps
step 1
Understand the concept of an inferior good: An inferior good is a type of good for which demand decreases as the income of consumers increases, assuming all other factors remain constant
step 2
Analyze the effect of an increase in income on the demand for an inferior good: If the income of milk buyers increases, the demand for milk, being an inferior good, will decrease
step 3
Determine the effect on equilibrium price and quantity: A decrease in demand for an inferior good leads to a lower equilibrium price and quantity, as the demand curve shifts to the left
Answer
C
Key Concept
Inferior Good Demand Reaction to Income Increase
Explanation
When income increases, the demand for an inferior good decreases, leading to a lower equilibrium price and quantity.
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