Inferior Good from Negative Income Elasticity

Steps:

• Income elasticity of demand (YED) = -0.5 indicates an inferior good, where demand falls as income rises.
• In economic recession, income decreases, so quantity demanded increases for inferior goods.
• Total revenue = price × quantity; with price constant, rising quantity boosts revenue.
• Thus, recession leads to higher total revenue.

Why B is correct:

• For inferior goods (YED < 0), falling income during recession increases demand per the YED definition, raising total revenue.

Why the others are wrong:

• A: Economic growth raises income, decreasing demand and revenue for inferior goods.
• C: YED provides no information on substitutes or price elasticity of demand.
• D: YED gives no data on substitutes or optimal pricing strategy.

Final answer: B