- CFA Exams
- CFA Level I Exam
- Study Session 4. Economics (1)
- Reading 12. Topics in Demand and Supply Analysis
- Subject 3. Substitution Effect, Income Effect, Normal and Inferior Goods
CFA Practice Question
A decrease in income should ______
A. shift demand for an inferior product inwards.
B. shift demand for an inferior product outwards.
C. shift supply for an inferior product outwards.
Explanation: Remember consumers will buy less of an inferior good when they have more income as they switch to more luxurious products.
User Contributed Comments 2
| User | Comment |
|---|---|
| thekobe | outwards?? |
| ChuongN | Since it is an inferior good, people want more when they have less money, thus shifting the demand curve to the right because income decreased. |