The Demand Curve for Corn Is Downward Sloping

question 175

Multiple Choice

The demand curve for corn is downward sloping.What happens if the price of corn, an inferior good, falls?

• A)The income effect which causes you to reduce your corn purchases is smaller than the substitution effect which causes you to increase your corn purchases, resulting in a net increase in quantity demanded.
• B)The income effect which causes you to increase your corn purchases is larger than the substitution effect which causes you to reduce your corn purchases, resulting in a net increase in quantity demanded.
• C)Both the income and substitution effects reinforce each other to increase the quantity demanded.
• D)The income and substitution effects offset each other, but the price effect of an inferior good leads you to buy less corn.

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Definitions:

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