Which type of goods experiences a decrease in demand as income increases?

The correct answer is that inferior goods experience a decrease in demand as income increases. Inferior goods are defined as products that people tend to buy less of when their income rises because they can now afford better-quality alternatives or more expensive items. For example, individuals might purchase generic brands or used items when their income is low, but as their income increases, they may choose to buy brand-name products or new items instead, leading to a drop in demand for inferior goods.

In contrast, normal goods are those that see an increase in demand as income increases, as consumers are able to purchase more of these goods when they have higher income levels. Substitutes and complements refer to the relationship between goods rather than their demand in relation to income changes. Substitutes are items that can replace each other, while complements are goods that are used together. Their demand patterns are influenced by different factors unrelated to changes in consumer income in the same direct manner that affects inferior goods.