Answer to Question #185030 in Microeconomics for Ahmad

Question

Maize is considered to be an inferior good. Assume that the original demand curve is D1 and the original supply curve is S1.

1.Explain the impact of an increase in income on the maize market .

2.Explain the impact of an increase in the price of rice(a substitute in consumption for maize) on the maize market.

3.Explain the impact of an increase in wages for farm labourers on the maize market.

Answer 1

1) since maize is an inferior good it's demand will decrease if income increases

2) the demand n maize will increase since the substitution product got more expensive

3) since the wage is higher the suppliers prices will increase which will decrease the demand