The recession that began in December 2007 resulted in declining incomes as some
ID: 1132610 • Letter: T
Question
The recession that began in December 2007 resulted in declining incomes as some people lost their jobs and others were forced to work fewer hours or have their wages reduced. How did this affect the market for fast food restaurants? A decrease in income as people lose their jobs will shift the market demand curve for fast food restaurants In particular, the demand curve will shift to the O A. right, if fast food is a normal good. O B. left, if fast food is an inferior good. O C. left, if fast food is unrelated to income. D. right, if fast food is an inferior good.Explanation / Answer
Answer
As some people loose their jobs and some got there wage reduced, this will result in decrease in income. As Income decreases if a good is a normal good then demand decreases and hence Market Demand curve will shift to the left. And If a good is an inferior Good then decrease in income will result in increase in demand and hence Market demand will shift to the right. Hence, If income decreases and If Fast Food is a normal Good demand will shift to the Left and If Fast Food is an inferior Good then Demand will Shift to the Right.
Hence The correct answer is Demand Curve will shift to the (d) RIGHT, IF Fast Food is an inferior good.
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