Question

During an economic upturn when consumer income rises, the demand for caviar increases and the demand for hummus decreases. This implies that caviar:
A) and hummus are complements.
B) is a normal good and hummus is an inferior good.
C) is an inferior good and hummus is a normal good.
D) is an economic bad and hummus is an economic good.

Answer 1

Answer:

The correct answer is letter "B": is a normal good and hummus is an inferior good.

Explanation:

During economic upturns, normal goods quantity demanded usually increases because consumers have more money, thus they re likely to satisfy their needs with higher quantities of regular products they purchase. Under the same scenario, inferior goods quantity demanded decreases because the purchase of those products seem unnecessary for consumers.

Thus, in the example as caviar quantity demanded increases during the economic upturn, it is a normal good, while hummus is an inferior good since its quantity demanded decreased.