The distinction between a normal and an inferior good is A. when income increases, demand for a normal good increases while demand for an inferior good falls. B. normal goods are used together while inferior goods are used for the same purposes. C. when income increases, demand for a normal good decreases while demand for an inferior good increases. D. normal goods are used for the same purposes while inferior goods are used together.

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Business

Colin

6 January, 14:15

The distinction between a normal and an inferior good is A. when income increases, demand for a normal good increases while demand for an inferior good falls. B. normal goods are used together while inferior goods are used for the same purposes. C. when income increases, demand for a normal good decreases while demand for an inferior good increases. D. normal goods are used for the same purposes while inferior goods are used together.

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Answers (1)

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Mariela Cox · Answer 1

The correct answer is option A.

Explanation:

Normal goods have positive income elasticity, so when there is an increase in the income of the consumer, the quantity demanded of the normal goods will increase.

On the other hand, the inferior goods have a negative income elasticity. So when the income of the consumer increases the demand for inferior goods decline. This is because as income increases, the consumers will prefer normal goods.