A typical consumer consumes both coffee and donuts. After the consumer's income decreases, the consumer consumes more coffee but fewer donuts than before. For this consumer, donuts are a normal good, but coffee is an inferior good.

Question

Quizplus · Accepted Answer

When a consumer's income decreases and they consume more of a good (in this case, coffee), that good is considered an inferior good because consumption increases as income decreases. Conversely, if they consume fewer donuts after a decrease in income, donuts are considered a normal good, as consumption decreases when income decreases.

A Typical Consumer Consumes Both Coffee and Donuts