Goods for which demand will fall if income rises or rise if income falls

• A. Inferior goods
• B. Normal goods
• C. Substitute goods
• D. Complementary goods

Answer: (A)

The key idea is how demand responds to changes in income, known as income elasticity of demand. For inferior goods, demand moves in the opposite direction to income: it falls when income rises and rises when income falls. This happens because as people’s incomes increase, they opt for higher-quality or more desirable substitutes, reducing purchases of cheaper, inferior options. When incomes drop, people tighten their budgets and rely more on cheaper goods, boosting demand for these inferior items.

Normal goods, by contrast, have positive income elasticity—demand increases as income increases. Substitute goods and complementary goods aren’t defined by income changes themselves: substitutes relate to the availability and price of similar goods, and complements relate to goods that are often consumed together. So the description given matches inferior goods. Examples include budget or store-brand products, low-cost services, or basic everyday items that people may switch away from as they can afford pricier alternatives.