Let's take an inferior good.
This will have begative income elasticity of demand.
Thus as income falls, demand rises.
Equally as income rises, demand falls.
If the price of the inferior good rises then real income falls.
Thus as per above, more is demanded.
So, the price of inferior godos rises and so does demand. So all retailers who sell cheap and tacky goods have to do is...raise the price!
Now let's deal with some of the comments:
The rise in price depends on the reaction of demand?????
So if price goes up - no problem?
MCQ Walkthrough 9708/32 (India) (Q21 - Q30)
2 months ago