Homework Answers
An inferior good is a good whose demand decreases when consumer income rises (or demand increases when consumer income decreases), unlike normal goods, for which the opposite is observed. Normal goods are those goods for which the demand rises as consumer income rises.
So , as x1* = x1( p1,p2, M )
where p1 = price of good one
p2= price of good two
M = income
So as given in the question dx1 / dm = -1 ,
which means that as income increases, demand for x1 will fall or vice versa. In other words they both are having a negative relation between two . So x1 is an inferior good .
( C ) part is a correct answer
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