Inferior Goods and Demand Relationships

Steps:

• Recall that inferior goods have negative income elasticity: demand falls as income rises.
• Apply the law of demand: for all goods, demand decreases as price increases (negative price elasticity).
• Evaluate choices: match inferior good traits to income and price relationships.
• Select the option aligning both correctly.

Why B is correct:

• Inferior goods show negative income elasticity (demand decreases with higher income) and negative price elasticity (law of demand).

Why the others are wrong:

• A: Incorrectly states positive income relationship for inferior goods.
• C: Wrongly claims positive price relationship for normal goods, violating law of demand.
• D: Falsely gives negative income relationship for normal goods.

Final answer: B