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JAMB Economics 2007 Question 10

Question 10

Theory of Demand

A commodity is described as inferior when the

  1. A.income effect is negative
  2. B.income effect is positive
  3. C.substitution effect is negative
  4. D.substitution effect is positive
Show the answer and explanation

Answer: A (income effect is negative)

Explanation

For an inferior good, people buy less of it as their income rises, so its income effect is negative.