A Level Economics AQA Practice Exam

What is a key characteristic of inferior goods regarding consumer behavior?

1. They are perceived positively regardless of income

2. They tend to be avoided as income rises

3. They demonstrate increased demand with rising prices

4. They have a high luxury appeal

The correct answer is: They tend to be avoided as income rises

The correct understanding of inferior goods is that they are those goods for which demand decreases as consumer income rises. This means that when people have more disposable income, they tend to purchase fewer inferior goods because they can now afford to buy higher-quality or luxury alternatives. The key characteristic of inferior goods is their inverse relationship with income; as consumers' financial situations improve, they often seek out goods that they view as superior or more desirable. The other options do not accurately describe inferior goods. While some may perceive certain inferior goods positively, this perception is not uniform across all consumers and does not define their economic classification. Increased demand with rising prices typically relates to normal goods or Giffen goods and is not a defining trait of inferior goods. Lastly, inferior goods generally do not possess luxury appeal; they are often seen as lower-quality substitutes for more expensive products.