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JAMB Economics 2003 Question 2

Question 2

Price Determination

For an inferior good, a decrease in real income will lead to

  1. A.a lower equilibrium price
  2. B.a change in quantity demanded
  3. C.an outward shift of the demand curve
  4. D.an inward shift of the demand curve
Show the answer and explanation

Answer: C (an outward shift of the demand curve)

Explanation

People buy more of an inferior good when their income falls, so its demand curve shifts outwards (to the right).