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 increase, but we cannot determine what happens to quantity
(B) We cannot determine what happens to price, but quantity will increase
C) Price will decrease and quantity will decrease
(D) Price will increase and quantity will decrease
(E) Price will decrease and quantity will increase

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 increase, but we cannot determine what happens to quantity
(B) We cannot determine what happens to price, but quantity will increase
C) Price will decrease and quantity will decrease
(D) Price will increase and quantity will decrease
(E) Price will decrease and quantity will increase

Accepted Answer

***C*** ∻Key Concept∻ ⚹Income Effect on Inferior Goods⚹ ∻Explanation∻ ⚹When the income of buyers increases, the demand for an inferior good typically decreases because consumers will buy more of a normal good instead. This decrease in demand for milk leads to a lower equilibrium price and quantity.⚹◊How will an increase in income among milk buyers impact the demand for milk in the market according to the income effect in macroeconomics?⍭ Generate me a similar question◊

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