Question

Suppose your income falls from 35,000 to 33,000 and that your quantity demanded of a good increases from 40 to 55. The good is said to be a(n):

1) normal good
2) inferior good
3) complementary good
4) substitute good

Answer 1

The good is an inferior good as the quantity demanded increases when income falls, which is the defining characteristic of an inferior good.

Step-by-step explanation:

When income falls from $35,000 to $33,000 and the quantity demanded of a good increases from 40 to 55, the good in question is an inferior good. This is because an inferior good is defined by the characteristic that as income decreases, the quantity demanded for the good increases. In contrast, a normal good would experience a decrease in the quantity demanded when income falls.

The good can't be a complementary or substitute good in this scenario because those classifications are about the relationship between goods rather than the relationship between income and the quantity demanded of a single good.