When her income increased from $10,000 to $20,000,Heather's consumption of macaroni decreased from 10 pounds to 5 pounds and her consumption of soy-burgers increased from 2 pounds to 4 pounds.We can conclude that for Heather,macaroni
A)and soy-burgers are both normal goods with income elasticities equal to 1.
B)is an inferior good and soy-burgers are normal goods;both have income elasticities of 1.
C)is an inferior good with an income elasticity of -1 and soy-burgers are normal goods with an income elasticity of 1.
D)and soy-burgers are both inferior goods with income elasticities equal to -1.

Question

Quizplus · Accepted Answer

Since Heather's consumption of macaroni decreased as her income increased, it suggests that macaroni is an inferior good. An inferior good has a negative income elasticity, hence the income elasticity of macaroni is -1. On the other hand, Heather's consumption of soy-burgers increased as her income increased, indicating that soy-burgers are a normal good. A normal good has a positive income elasticity, hence the income elasticity of soy-burgers is 1. Therefore, the correct answer is C.

When Her Income Increased from $10,000 to $20,000,Heather's Consumption of Macaroni