Betsy graduates from college,where she earned $3,000 a year working part-time,and takes a job as a third grade teacher,where she now earns $30,000 per year.About the same time she received her first paycheck,her bicycle was stolen.With her old income she would have purchased a new bike but with her new income she purchased a new car.Therefore,
A) bicycles are a normal good for Betsy
B) automobiles are an inferior good for Betsy
C) automobiles are a normal good for Betsy
D) Betsy's supply curve for automobiles is upward-sloping
E) bicycles and automobiles are complementary goods for Betsy

Question

Quizplus · Accepted Answer

The fact that Betsy chooses to purchase a new car instead of a new bicycle after her income increases suggests that automobiles are a normal good for her. If automobiles were an inferior good, she would have purchased a bicycle even though she could now afford a car. Additionally, the other answer choices do not accurately reflect the information given in the scenario.

Betsy Graduates from College,where She Earned $3,000 a Year Working