The correct option is
B. A decrease in the price of a substitute good.
Detailed Explanation
To understand why option B is the correct answer, we need to delve into the concepts of demand, normal goods, and substitutes.
- Understanding Demand for Normal Goods:
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Normal goods are those for which demand increases as consumer income rises. Conversely, demand decreases when consumer income falls. However, the demand for normal goods can also be influenced by other factors, such as the prices of related goods (substitutes and complements) and consumer preferences.
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Substitute Goods:
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Substitute goods are products that can replace each other in consumption. For example, if the price of coffee decreases, some consumers may choose to buy coffee instead of tea, which is a substitute for coffee.
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Impact of a Decrease in the Price of a Substitute:
- When the price of a substitute good decreases, consumers are likely to buy more of that substitute instead of the normal good. This shift in consumer preference leads to a decrease in the demand for the normal good. For instance, if the price of tea (a substitute for coffee) falls, consumers may opt for tea over coffee, resulting in a decrease in the demand for coffee.
Why the Other Options Are Incorrect
- A. An increase in consumer income:
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This option is incorrect because an increase in consumer income typically leads to an increase in the demand for normal goods. As people have more disposable income, they are more likely to purchase more of the normal good, not less.
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C. A change in consumer preferences favoring the good:
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This option is also incorrect. If consumer preferences shift in favor of the good, demand for that good would increase, not decrease. For example, if a new health study shows that a particular food is very beneficial, more consumers will want to buy it, increasing its demand.
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D. A decrease in the price of the good itself:
- This option is incorrect as well. A decrease in the price of the good itself typically leads to an increase in the quantity demanded, according to the law of demand. When the price of a good falls, consumers are generally more willing to buy more of it, leading to an increase in demand.
Summary of Key Concepts
- Normal Goods: Demand increases with rising income and decreases with falling income.
- Substitutes: A decrease in the price of a substitute good can lead to a decrease in demand for the normal good.
- Consumer Preferences: Favorable changes in consumer preferences increase demand.
- Price Effects: A decrease in the price of the good itself increases the quantity demanded.
Revision Summary
- A decrease in the price of a substitute good leads to a decrease in demand for a normal good.
- Normal goods see increased demand with rising income and favorable consumer preferences.
- The law of demand states that lower prices for a good increase the quantity demanded.
- Understanding the relationships between goods (substitutes and complements) is crucial for analyzing demand shifts.