Answer to Question #195074 in Microeconomics for wali abrar

Question

Consider a market for Ice Cream an inferior good in Pakistan. For each of the given events, 

identify which of the determinants of the demand or supply are affected. Also indicate whether 

demand or supply increase or decreases. Then draw a diagram to show the effect on the price and 

quantity of Ice Cream

Answer 1

An inferior good is a good whose demand decreases when consumer income rises, so if income in Pakistan increases demand for ice cream will decrease, since increased people's income will allow them to purchase goods of their choice.

Below is an example illustrating an inferior good.

From the graph it can be seen that as average income per week increases from $750 to $1000, the demand for the inferior good, for example, cheap motels, decreases from 200 to 150 units.