An increase in consumer income will increase demand for a _________ but decrease demand for a?
Correct answer: B. normal good inferior good
- A. substitute good, inferior good
- B. normal good inferior good
- C. inferior good normal good
- D. normal good, complementary good
Explanation
Higher income usually raises demand for normal goods but reduces demand for inferior goods, which consumers replace as their purchasing power improves. Thus the pair is normal good followed by inferior good.
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Individual consumers, firms and markets are examined through demand and supply, elasticity, consumer choice, production, costs, revenue and the determination of prices and output. The topic also covers market structures such as perfect competition, monopoly and oligopoly, plus market failure, externalities and the distinction between microeconomic decisions and economy-wide outcomes.
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