Question 24 Suppose The Income Of Buyers In A Market For An Inferior Good Decrea

QUESTION 24

  1. Suppose the income of buyers in a market for an inferior good decreases and a technological advancement occurs also. What would we expect to happen in the market?
  2. Equilibrium price would decrease, but the impact on equilibrium quantity would be ambiguous.
  3. Equilibrium quantity would increase, but the impact on equilibrium price would be ambiguous.
  4. Equilibrium quantity would decrease, but the impact on equilibrium price would be ambiguous.
  5. None of the above is correct.

since we are talking about an inferior good then I think when the buyers income goes down they would buy fewer quality or normal goods and buy more inferior goods therefore the demand curve for inferior goods would shift outward to the right and if there is a technological advance then the supply for inferior goods would increase so I think the answer is  3. Equilibrium quantity would increase but the impact on price would be ambiguous

however maybe if buyers income goes down then maybe they just buy fewer of all goods …  if that is the case maybe quantity would be ambiguous and price would go down …..could you please help me clarify my thinking  so I can apply to future questions thank you

is the answer 3

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