Question

Suppose you manage a corner grocery store. If peanut butter is an inferior good, what do you suppose would happen to the price and quantity sold of peanut butter as incomes fell during a recession?

a. The price would increase and the quantity would decrease.
b. The price and quantity would both decrease.
c. The price and quantity would both increase.
d. The price would decrease and the quantity would increase.

Answer 1

c. The price and quantity would both increase.

Step-by-step explanation:

Based on the information provided within the question it can be said that during a recession when consumer income drops, the price and quantity of peanut butter would both increase. This is because an inferior good is those in which a decrease in consumer income causes and increased purchase and price of the product. Therefore since peanut butter is an inferior good this will happen.