Suppose that John receives a pay increase.We would expect John's demand for:

Name: Suppose that John receives a pay increase.We would expect John's demand for:
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Question

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When John receives a pay increase, his purchasing power increases, leading to an increased demand for luxury goods, which are considered normal goods but with a higher income elasticity of demand. Demand for inferior goods typically decreases with income increases, as consumers opt for higher-quality alternatives.

Suppose That John Receives a Pay Increase