7 Normal and inferior goods Her income increased while the p

7. Normal and inferior goods

-Her income increased while the prices of theater and concert tickets stayed the same.

-The prices of both theater and concert tickets decreased while her income stayed the same.

-The price of theater tickets increased while her income and the price of concert tickets stayed the same.

-The price of concert tickets increased while her income and the price of theater tickets stayed the same.

Based on Cho\'s consumption of plays and concerts after her budget constraint shifted, plays are ________ (INFERIOR/NORMAL) goods and concerts are __________ (INFERIOR/NORMAL) goods.

Solution

(a) Budget constraint could shift because:

- Her income increased while the prices of theater and concert tickets stayed the same.

- The prices of both theater and concert tickets decreased while her income stayed the same.

(b) Plays are normal goods & concerts are normal goods (because, as income rises, consumption of both goods rise).