Figure 21-16

-Refer to Figure 21-16.When the price of X is $40,the price of Y is $40,and income is $160,Steve's optimal choice is point B.Then Steve's income increases to $320,and his optimal choice is point E.For Steve,
A) good X is a normal good, and good Y is an inferior good.
B) good X is an inferior good, and good Y is a normal good.
C) both good X and good Y are normal goods.
D) good Y is a normal good; good X is neither a normal nor an inferior good.

Question

Figure 21-16
 
-Refer to Figure 21-16.When the price of X is $40,the price of Y is $40,and income is $160,Steve's optimal choice is point B.Then Steve's income increases to $320,and his optimal choice is point E.For Steve,
A) good X is a normal good, and good Y is an inferior good. 
B) good X is an inferior good, and good Y is a normal good. 
C) both good X and good Y are normal goods. 
D) good Y is a normal good; good X is neither a normal nor an inferior good.

Quizplus · Accepted Answer

Steve's optimal choice is point B when the price of X is $40 and the price of Y is $40, which means that he is willing to consume both goods, showing that they are normal goods. Furthermore, when Steve's income increases to $320, his optimal choice shifts to point E, which shows that both goods are still normal goods. Therefore, both good X and good Y are normal goods.

Figure 21-16 -Refer to Figure 21-16.When the Price of X Is $40,the