Asked by Nicholas Villar on May 31, 2024
Verified
When Celia has an income of $1,200, she consumes 30 units of good A and 55 units of good B. After Celia's income increases to $1,800, she consumes 15 units of good A and 70 units of good B. Which of the following statements is correct?
A) Both goods A and B are normal goods.
B) Both goods A and B are inferior goods.
C) Good A is an inferior good, and good B is a normal good.
D) Good A is a normal good, and good B is an inferior good.
Inferior Good
A type of good for which demand decreases as the income of the consumer increases, opposite to the behavior observed with normal goods.
Normal Good
A good for which demand increases as the income of consumers increases and decreases as the income of consumers decreases, all else being constant.
Income
The financial gain received by an individual or a business in return for providing a good or service or through investing capital, typically measured over a set period of time.
- Understand the impact of changes in income on the consumption of normal and inferior goods.
- Differentiate among various categories of products (normal, inferior, complements, and substitutes) according to consumer purchasing patterns.
Verified Answer
ZK
Zybrea KnightJun 06, 2024
Final Answer :
C
Explanation :
Good A is an inferior good because Celia consumes fewer units of it as her income increases (from 30 units to 15 units). Good B is a normal good because she consumes more of it as her income increases (from 55 units to 70 units).
Learning Objectives
- Understand the impact of changes in income on the consumption of normal and inferior goods.
- Differentiate among various categories of products (normal, inferior, complements, and substitutes) according to consumer purchasing patterns.