Question

During a recession (downturn) in the economy firms lay off workers and the unemployment rate rises. During these times we can expect the demand for normal goods to ___ and the demand for inferior goods to ____.

Answer 1

Answer:

The demand for normal goods will fall or decrease and the demand for inferior goods will rise or increase

Explanation:

What is a recession? - Recession is a period in business cycle in which the aggregate economic activity of a country is slowing down or declining.

During recession, there is a decrease in spending on the part of both producers and consumers. Unemployment becomes high, so income level drops.

Demand for normal goods in this period drops because of the fall in level of income. The consumers are managing what is left from their income.

And demand for inferior goods rises because as a result of the constraints (money), consumers now prefer low quality goods which usually go for a lower price than normal goods