Question

In general, a decrease in consumer income will have what effect on demand for normal goods?a. it will have no effectb. it will cause demand to risec. it will cause demand to falld. it will cause demand to fluctuate sharply

Answer 1

The correct answer is option c.

Step-by-step explanation:

Normal goods can be defined as those goods whose demand increases with increase in income and vice versa. For instance, food, clothing, durable goods etc.

The normal goods have a positive income effect. This means that the demand for normal goods change in the same direction as change in income level. There is a direct relationship.

So, when there is a decrease in the income level, the demand for normal goods will also decline., as there is a decline in the purchasing power of the consumer.