Assume that milk is an inferior good.
Assuming all other factors remain constant, if the income of milk buyers increases, what will happen to the equilibrium price and quantity of milk?

Choose 1 answer:
(A) Price will decrease and quantity will increase
(B) Price will decrease and quantity will decrease
(c) Price will increase, but we cannot determine what happens to quantity
(D) We cannot determine what happens to price, but quantity will increase
(E) Price will increase and quantity will decrease

Question

Assume that milk is an inferior good.
Assuming all other factors remain constant, if the income of milk buyers increases, what will happen to the equilibrium price and quantity of milk?

Choose 1 answer:
(A) Price will decrease and quantity will increase
(B) Price will decrease and quantity will decrease
(c) Price will increase, but we cannot determine what happens to quantity
(D) We cannot determine what happens to price, but quantity will increase
(E) Price will increase and quantity will decrease

Accepted Answer

∻Solution∻ ‖ a ⋮ Definition of Inferior Good: An inferior good is a type of good for which demand decreases as the income of consumers increases. ‖ ‖ b ⋮ Impact of Income Increase: When the income of buyers increases, the demand for an inferior good like milk decreases. ‖ ‖ c ⋮ Demand Curve Shift: A decrease in demand shifts the demand curve to the left. ‖ ‖ d ⋮ Equilibrium Price and Quantity: A leftward shift in the demand curve leads to a lower equilibrium price and a lower equilibrium quantity. ‖ ∻Answer∻ ⚹ (B) Price will decrease and quantity will decrease ⚹ ∻Key Concept∻ ⚹ Inferior Good ⚹ ∻Explanation∻ ⚹ For an inferior good, an increase in buyers' income leads to a decrease in demand, which in turn decreases both the equilibrium price and quantity. ⚹◊What impact does an increase in income of milk buyers have on the demand for milk in the market?⍭ Generate me a similar question◊

Sia