Michael graduates from college and his income increases by $40,000 a year. Other things held constant, he decreases the quantity of pizza he buys. For Michael, pizza is:
A) an inferior good.
B) a complement.
C) a substitute.
D) a normal good.

Question

Quizplus · Accepted Answer

When a person's income increases, they usually have a higher demand for normal goods, which are goods for which demand increases as income increases. However, for inferior goods, demand decreases as income increases. Since Michael is buying less pizza after his income increased, it implies that pizza is an inferior good for him.

Michael Graduates from College and His Income Increases by $40,000