Inferior goods shift demand right when income falls; larger |IED| amplifies shift

Steps:

• Calculate %ΔQD = IED × %Δincome (-5%) for each option.
• Inferior goods (negative IED) yield positive %ΔQD, shifting demand right.
• Normal goods (positive IED) yield negative %ΔQD, shifting demand left.
• Compare magnitudes: furthest right shift is largest positive %ΔQD.

Why B is correct:

• For inferior good with IED = -1.2, %ΔQD = (-1.2) × (-5%) = +6%, maximizing rightward shift per income elasticity formula.

Why the others are wrong:

• A: IED = -0.8 gives +4% shift, smaller than B's +6%.
• C: Normal good IED = +0.9 gives -4.5% shift (leftward).
• D: Normal good IED = +1.5 gives -7.5% shift (leftward, opposite direction).

Final answer: B