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JAMB Economics 1980 Question 23

Question 23

Theory of Demand

If the price of a commodity falls and the quantity purchased of it does not rise, the commodity can be described as

  1. A.normal
  2. B.abnormal
  3. C.inferior
  4. D.superior
  5. E.scarce.
Show the answer and explanation

Answer: C (inferior)

Explanation

For an inferior good (such as a Giffen good) a fall in price may not lead people to buy more, because the income effect works against the substitution effect.