Reduction in real income boosts demand for inferior goods

Steps:

• Inferior goods see higher demand when consumer income decreases due to negative income elasticity.
• A rightward demand curve shift reflects increased quantity demanded at every price level.
• Taxes reducing purchasing power simulate an income drop, affecting demand position.
• Sales tax specifically hikes consumption costs, lowering real income effectively.

Why B is correct:

• Per the income effect in consumer theory, higher sales tax erodes real income, raising demand for inferior goods and shifting the curve right.

Why the others are wrong:

• A: Rise in consumers' income tax cuts nominal income but targets earnings directly, not consumption costs like sales tax.
• C: Rise in income tax mirrors A, reducing disposable income without the broad consumption impact of sales tax.
• D: Rise in complement price lowers demand for the good via cross-price effect, shifting curve left.

Final answer: B