In an AC circuit the power factor is cos φ, where φ is the phase angle between the supply voltage and the current. The sign of that phase relationship — whether current lags or leads the voltage — is fixed by the nature of the load.

• An inductor opposes any change in the current through it (it develops a back-EMF), so current cannot rise as quickly as the voltage. As a result the current reaches its peaks after the voltage does — it lags.
• For a mixed resistive-inductive (RL) load the resistance keeps the two waveforms from being a full quarter-cycle apart, so the lag angle satisfies 0° < φ < 90°.
• Because the current lags the voltage, the circuit is said to have a lagging power factor, which is the correct answer.

The other options describe different conditions. A leading power factor arises with a net capacitive load, where current leads the voltage — the opposite situation to the inductive load here. Unity power factor (cos φ = 1) means φ = 0°, i.e. a purely resistive circuit with voltage and current exactly in phase, which contradicts the stated non-zero lag. Zero power factor (cos φ = 0) requires φ = 90°, a purely reactive load, whereas the presence of resistance guarantees φ is less than 90° and the power factor is non-zero.