Good Y is an inferior good. If the income of those who buy good Y rises, the ___

Question

Good Y is an inferior good. If the income of those who buy good Y rises, the ________ curve for good Y will shift _____ resulting in a _____________ in the equilibrium price of Y and a _____ in the equilibrium quantity of Y. Select one: a. supply, rightward, decrease, increase b. demand, leftward, decrease, decrease c. demand, rightward, increase, increase d. supply, leftward, increases, decreases e. supply leftward, increase, increase Exhibit 3-11 Unit of Good X Maximum Buying Price Minimum Selling Price Result 1st 2nd 3rd 4th 5th 6th $12 11 10 9 8 1 $6 7 8 9 10 11 (A) (B) (C) (D) (E) (F) Refer to exhibit 3-11. Fill in blanks (C) and (D) respectively with Exchange or No Exchange to indicate whether or not exchange would take place at the given prices. Select one a. Exchange, Exchange b. Exchange No Exchange c. No Exchange Exchange d. No Exchange, No Exchange

Explanation / Answer

3. When Y is inferior good, if income of those who buy goods Y rises, then the demand curve for good Y will shift leftward resulting in decrease in the equilibrium price of Y and decrease in the quantity of Y.

This is because, inferior goods is inversely related to income.

The correct answer is (b).

4. At (C), there will be exchange, because what maximum amount consumer is willing to pay exceeds the amount the buyer is willing to accept.

At (D) there will be exchange, because what maximum amount consumer is willing to pay exactly equals the amount the buyer is willing to accept.

The correct answer is (a).

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