Recession and Instant Noodles
The question
The market for instant noodles in the country of Talveska is initially in equilibrium. A deep recession causes household incomes across Talveska to fall sharply, and instant noodles are an inferior good. Show the effect of this change on the market for instant noodles, assuming all else is held constant. Show the effect on the Supply and Demand graph.
Drag a curve, or use the arrow buttons. Want the free-play version with every control? Open this graph in the sandbox.
Recession and Instant Noodles: the worked answer
On the Supply and Demand graph, Demand shifts right.
Why Demand shifts right
Instant noodles are an inferior good, which means income and demand move in opposite directions, so when household incomes fall, consumers buy more instant noodles at every price. Income is a determinant of demand, so the demand curve shifts to the right. Nothing has changed about the cost or technology of producing instant noodles, so the supply curve stays put.
What happens to the equilibrium
The equilibrium price of instant noodles rises and the equilibrium quantity increases.
The mistake students make on this one
The reflex answer is to shift demand left because incomes fell, which is the correct rule for a normal good and the wrong one here. For an inferior good, falling income raises demand at every price, so the curve shifts right.
On exam day
Circle the words "inferior good" and flip the income rule before your pencil touches the graph; a recession stem is only a trap if you skip that one step.
How this is graded
The checker reads every curve's position before and after your answer. You are marked correct only when Demand shifts right and every other curve on the Supply and Demand graph stays where it started — the same standard an AP reader applies to a drawn graph: the right shift, and nothing extra. There is no AI involved; the rubric is the geometry.
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