Asked by Brittney Buchanon on May 11, 2024

verifed

Verified

A question on an economics exam asks: What happens in the market for margarine when income rises? Allison, an excellent student, shows the demand for margarine decreasing. Is she necessarily wrong? Why or why not?

Demand for Margarine

The consumer desire or market requirement for margarine, reflecting how much of the product people are willing and able to purchase at a given price.

Income Rises

A situation where there is an increase in the amount of earnings received by an individual, household, or economic entity.

  • Connect the principles of price elasticity, income elasticity, and consumer decision-making to practical examples in the real world.
verifed

Verified Answer

HB
Hailey BrookeMay 17, 2024
Final Answer :
If we consider Allison's answer wrong, we are implicitly assuming that margarine is a normal good and that the demand for margarine should decrease. But suppose Allison believes that margarine is an inferior good. In this case, her answer is correct. Good exam writers need to make explicit what they want students to assume.