If an Increase in Income Leads to a Decrease in the Demand

question 215

Multiple Choice

If an increase in income leads to a decrease in the demand for salami,then salami is

• A)an inferior good.
• B)a neutral good.
• C)a necessity.
• D)a normal good.

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Definitions:

Pigouvian Tax

A tax imposed on activities that generate negative externalities, aiming to correct an inefficient market outcome by increasing the cost to include the external costs.

CFCs

Chlorofluorocarbons; chemical compounds used in aerosol sprays and refrigerants that have been found to deplete the ozone layer.

Adverse Selection

A situation in which one party in a transaction has more information than the other, often leading to the selection of poorer-quality goods or higher-risk individuals.

Seller Ratings

Evaluations or scores given to sellers on e-commerce platforms, based on the quality of their products, shipping speed, and customer service.