-The above figure shows Bobby's indifference map for soda and juice.B₁ indicates his original budget line.B₂ indicates his budget line resulting from an increase in the price of soda.From the graph,one can conclude that A) Bobby views soda as an inferior good. B) Bobby's demand for soda is perfectly inelastic. C) Bobby views soda as a normal good. D) the income elasticity of demand for soda is 1.

Question

Quizplus · Accepted Answer

When the price of soda increases and Bobby buys less soda but more juice, it indicates that soda is a normal good for him. This is because he reduces consumption of soda as its price increases, which is consistent with the behavior towards normal goods, where demand decreases as price increases without specific reference to income changes or substitution effects.

-The Above Figure Shows Bobby's Indifference Map for Soda and Juice.B1

-The Above Figure Shows Bobby's Indifference Map for Soda and Juice.B₁