The correct answer is B. Negative.
An inferior good is a good whose demand decreases when consumers’ income increases. This is because consumers tend to substitute other, more desirable goods for inferior goods when they have more money to spend.
The income effect is the change in the quantity demanded of a good due to a change in income. For inferior goods, the income effect is negative, meaning that the quantity demanded decreases when income increases.
Here are some examples of inferior goods:
- Store-brand products
- Used cars
- Ramen noodles
- Public transportation
When consumers have more money to spend, they are more likely to buy name-brand products, new cars, fresh food, and private transportation. As a result, the demand for inferior goods decreases.