Soup is an inferior good if the demand
a. for soup falls when the price of a substitute for soup rises.
b. for soup rises when the price of soup falls.
c. for soup falls when income rises.
d. curve for soup slopes upward.
The Correct Answer and Explanation is :
The correct answer is c. for soup falls when income rises.
Explanation:
In economics, the term “inferior good” refers to a type of good for which demand decreases as consumer income increases. This is in contrast to normal goods, where demand rises as income increases. Inferior goods are often lower-quality or more affordable alternatives to other goods that consumers may prefer when they have limited income.
Let’s break down the answer choices to clarify:
- a. Demand for soup falls when the price of a substitute for soup rises: This statement describes a situation where soup and its substitute goods are considered competing goods. If the price of a substitute rises, people might buy more soup, not less. Therefore, this doesn’t describe an inferior good.
- b. Demand for soup rises when the price of soup falls: This is the basic law of demand, which states that as the price of a good decreases, the quantity demanded generally increases, assuming other factors remain constant. It does not describe the relationship between income and demand, which is what defines an inferior good.
- c. Demand for soup falls when income rises: This is the defining characteristic of an inferior good. As income increases, consumers may shift away from buying lower-cost goods (like soup, in this case) and instead purchase higher-quality alternatives, such as more expensive meals or dining options. When incomes rise, demand for inferior goods tends to fall.
- d. The curve for soup slopes upward: This describes an exception to the law of demand, where an increase in price results in an increase in quantity demanded (an unusual situation often caused by speculative buying or market manipulation). It doesn’t relate directly to the concept of an inferior good.
Thus, c is the correct answer, as it directly aligns with the definition of an inferior good in economic theory.