If bread is an inferior good, then an increase in income will lead to decrease in the demand.TrueFalse

Understanding the Concept

1. Definition of Inferior Goods: Inferior goods are defined as goods for which demand increases when consumer income decreases, and demand decreases when consumer income increases.

2. Income Effect: When consumers see an increase in their income, they tend to purchase less of inferior goods, opting instead for higher-quality substitutes or normal goods.

Relevant Theories

1. Law of Demand: This law states that, all else being equal, as the price of a good decreases, the quantity demanded increases, and vice versa. However, with inferior goods, the relationship is reversed concerning income.

Analysis

1. Given that bread is classified as an inferior good, an increase in income results in a decrease in the demand for bread, as consumers will shift their preference towards normal goods or higher-quality alternatives.

Verify and Summarize

1. The statement “an increase in income will lead to decrease in the demand” for bread, when bread is considered an inferior good, is true as per economic theory.

Final Answer

True. An increase in income will lead to a decrease in the demand for bread, which is classified as an inferior good.