As consumers experience an increase in income, the demand for steak increases and the demand for macaroni and cheese decreases. What can we determine from this information?
A) Steak and macaroni are substitute goods.
B) Steak and macaroni are complementary goods.
C) Steak is an inferior good, and macaroni is normal.
D) Steak is a normal good, and macaroni is inferior.

Question

Quizplus · Accepted Answer

As consumers experience an increase in income, they tend to shift towards more expensive and higher-quality goods. Therefore, the increase in income leads to an increase in the demand for steak, which is a normal good. On the other hand, the decrease in the demand for macaroni and cheese indicates that it is an inferior good. Therefore, the correct answer is D, where steak is a normal good, and macaroni is an inferior good.

As Consumers Experience an Increase in Income, the Demand for Steak