If the cost of an inferior good decreases, the demand for it:

Question

Question

This question was previously asked in

MP Excise Constable Official paper (Held On: 24 Feb 2023 Shift 1)

Answer 1

The correct answer is falls.

Key Points

Inferior goods are those goods for which demand decreases as consumer income rises.
When the cost of an inferior good decreases, consumers may switch to more preferred substitutes if their income allows.
As a result, the overall demand for inferior goods generally falls when their price decreases.
This behavior is contrary to normal goods, where a price decrease typically leads to an increase in demand.

Additional Information

Inferior Goods: Goods whose demand decreases as the consumer's income rises and vice versa.
Substitute Goods: Goods that can be used in place of each other; a decrease in the price of one can lead to a decrease in demand for the other.
Normal Goods: Goods for which demand increases as consumer income rises.
Income Effect: The change in demand for a good or service caused by a change in consumer's purchasing power due to a change in income.
Price Elasticity of Demand: A measure of the sensitivity of the quantity demanded of a good to a change in its price.