Question

If income of a consumer rises and he prefers to replace his basic mobile phone with a smartphone, then the demand for basic mobile phone will fall. In such case, basic mobile phone is a/an ______.

Options

• Inferior Good

• Substitute Good

• Normal Good

• Complementary Good

Answer 1

If income of a consumer rises and he prefers to replace his basic mobile phone with a smartphone, then the demand for basic mobile phone will fall. In such case, basic mobile phone is an Inferior Good. 

Explanation:

An inferior good is one whose demand falls when consumer income rises. Here, the consumer replaces the basic phone with a smartphone as income increases, reducing demand for the basic phone.