Suppose there are only two goods, A and B, and that consumer income is constant. If the price of good A falls and the consumption of good B rises, we can conclude that
A) B is a normal good.
B) B is an inferior good.
C) A is an inferior good.
D) both A and B are normal goods.
E) A is a normal good.

Question

Quizplus · Accepted Answer

If the consumption of good B rises as the price of good A falls, it suggests that good B is a normal good. Inferior goods are those whose consumption decreases as income increases, in this case, if good B were inferior, its consumption would decrease as the price of good A falls, but that is not what is happening. We can't conclude anything about whether A is normal or inferior.

Suppose There Are Only Two Goods, a and B, and That