In the figure to the right, the current position of the demand curve for a good is Upper D 1
,
and the price of the good, which is an inferior
good, is $4. If there is an increase in consumer incomes, which way will the demand curve shift? Will the quantity demanded of the good increase or decrease?
If the good is inferior, an increase in consumer incomes will lead to a decrease in the demand for the good. Therefore, the demand curve will shift to the left. The quantity demanded of the good will decrease.
To determine the shift of the demand curve and the impact on quantity demanded, we need to consider the nature of the good and the change in consumer incomes.
In this scenario, the good in question is an inferior good. An inferior good is a type of good for which demand decreases as consumer incomes increase.
Given that there is an increase in consumer incomes, the demand for the inferior good will decrease. Therefore, the demand curve will shift to the left.
As a result of the leftward shift of the demand curve, the quantity demanded of the good will decrease, assuming all other factors remain constant.