-Lisa spends all her income on pizzas and DVDs. The above table shows Lisa's marginal utility for pizza and marginal utility for DVDs. Suppose the price of a pizza is $10 and the price of a DVD is $10 and Lisa initially has $40 to spend on the two goods. Lisa gets a raise at work and so she now has $60 to spend on DVDs and pizza. With her increase in income, her consumption of DVDs ________ and hence DVDs are ________ good for Lisa.
A) rises; a normal
B) rises; an inferior
C) falls; a normal
D) falls; an inferior

Question

-Lisa spends all her income on pizzas and DVDs. The above table shows Lisa's marginal utility for pizza and marginal utility for DVDs. Suppose the price of a pizza is $10 and the price of a DVD is $10 and Lisa initially has $40 to spend on the two goods. Lisa gets a raise at work and so she now has $60 to spend on DVDs and pizza. With her increase in income, her consumption of DVDs ________ and hence DVDs are ________ good for Lisa.
A) rises; a normal 
B) rises; an inferior 
C) falls; a normal 
D) falls; an inferior

Quizplus · Accepted Answer

With an increase in income, if the consumption of a good rises, it is considered a normal good. Since Lisa's consumption of DVDs rises with her increased income, DVDs are a normal good for her.

-Lisa Spends All Her Income on Pizzas and DVDs