Question

If macaroni and cheese is an inferior good, what would happen to the equilibrium price and quantity of macaroni and cheese if consumers' incomes rise?
a. the equilibrium price would decrease, and the equilibrium quantity would increase.
b. both the equilibrium price and quantity would increase.
c. both the equilibrium price and quantity would decrease.
d. the equilibrium price would increase, and the equilibrium quantity would decrease.

Answer 1

The correct option is letter C.

Both the equilibrium price and quantity would decrease.

When the good in question are inferior, then with an increase in income, the demand for the good falls, as now the consumer would substitute the inferior good for the superior quality goods. The demand curve would shift inwards to the left and the price and quantity would fall.