ECONOMICS
ELASTICITY OF DEMAND
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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During a recession
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When wages rise more slowly than the price of products
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When unemployment is high
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All of these
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Detailed explanation-1: -Conversely, the demand for inferior goods increases when incomes fall or the economy contracts. When this happens, inferior goods become a more affordable substitute for more expensive goods.
Detailed explanation-2: -An increase in the inferior good’s price means that consumers will want to purchase other substitute goods instead but will also want to consume less of any other substitute normal goods because of their lower real income.
Detailed explanation-3: -As income increases, the consumer will go in for superior goods and consequently the demand for inferior goods will fall.
Detailed explanation-4: -Definition: An inferior good is a type of good whose demand declines when income rises. In other words, demand of inferior goods is inversely related to the income of the consumer.
Detailed explanation-5: -Inexpensive foods like instant noodles, bologna, pizza, hamburger, mass-market beer, frozen dinners, and canned goods are additional examples of inferior goods. As incomes rise, one tends to purchase more expensive, appealing or nutritious foods.