Multiple Choice
A change in which of the following will NOT shift the demand curve for ice cream?
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3. Supply and Demand
Supply and Demand Together: One-sided Shifts
Multiple Choice
If the economy booms and incomes rise, what happens in the markets for inferior goods?
A
Prices and quantities both rise
B
Prices and quantities both fall
C
Prices rise and quantities fall
D
Prices rise and quantities rise
Verified step by step guidance1
Understand the definition of inferior goods: Inferior goods are those goods for which demand decreases as consumer incomes rise, contrary to normal goods where demand increases with higher incomes.
Consider the effect of an economic boom: During an economic boom, consumer incomes generally increase, leading to changes in demand for different types of goods.
Analyze the demand for inferior goods: As incomes rise, consumers tend to buy fewer inferior goods because they can now afford better alternatives. This results in a decrease in demand for inferior goods.
Apply the demand-supply framework: With a decrease in demand for inferior goods, the demand curve shifts to the left. This shift typically leads to a decrease in both the equilibrium price and quantity in the market for inferior goods.
Conclude the market outcome: Given the leftward shift in the demand curve, the correct outcome in the market for inferior goods during an economic boom is that both prices and quantities fall.
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