In a world of just two goods where all income is spent on the two goods, both goods cannot be inferior. True or False? Explain

True. In a world with just two goods where all income is spent on those goods, it’s impossible for both goods to be inferior.

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This is because the concept of inferior goods implies that as income increases, demand for those goods decreases. However, if both goods were inferior, as income increases, demand for both goods would decrease simultaneously, contradicting the assumption that all income is spent on those goods. Therefore, at least one of the goods must be a normal good, where demand increases as income rises, in order for income to be spent on both goods.