Question

The decision by consumers to buy larger quantities of a good at each possible price cannot be caused by:

• A. An increase in the number of buyers
• B. A favourable change in the consumer tastes
• C. Consumer expectation that the prices will be higher in the future
• D. Rising incomes if it is an inferior good

Hint:

For inferior goods, an increase in income usually reduces demand, as consumers prefer higher-quality alternatives.

Answer 1

The Correct Option is D

Step 1: Understanding consumer behavior.
If a good is inferior, higher incomes usually lead to a decrease in demand for that good, as consumers tend to shift to higher-quality alternatives.

Step 2: Analysis of options.
- (A) An increase in the number of buyers: This will increase demand for the good.
- (B) A favorable change in the consumer tastes: This will increase demand for the good.
- (C) Consumer expectation that prices will be higher in the future: This can increase current demand.
- (D) Rising incomes if it is an inferior good: This will lead to a decrease in demand for the inferior good.

Step 3: Conclusion.
The correct answer is (D), as rising incomes will reduce demand for inferior goods.