Question

Suppose that consumer income increases and that ground meat is an inferior good. Which of the following will occur in the market for ground meat?
a. Market clearing price will rise, and equilibrium quantity will fall.
b. Market clearing price will fall, and equilibrium quantity will rise.
c. Market clearing price will rise, and equilibrium quantity will rise.
d. Market clearing price will fall, and equilibrium quantity will fall.

Answer 1

Answer:

d. Market clearing price will fall, and equilibrium quantity will fall.

Explanation:

Inferior goods are those goods which do not behave normally to market.

As with increase in consumer spending capacity, their demand decreases.

Accordingly with decrease in demand , the prices will fall.

Thus, either Statement b is correct or statement d.

Since demand and price both tend to fall, the equilibrium quantity will fall for the same, as the demand will be low, the equilibrium quantity will fall to meet the demand level.

Thus, Statement D is correct.