All else equal, when the price of gasoline falls, Brian purchases more gasoline and more candy. For Brian, we can definitely say that candy:
A) is a normal good and gasoline is an inferior good.
B) is a normal good but gasoline could be normal or inferior.
C) is a normal good and gasoline is a normal good.
D) could be normal or inferior good and gasoline is a normal good.

Question

Quizplus · Accepted Answer

When the price of gasoline falls and Brian purchases more gasoline and more candy, it indicates that candy is a normal good because his consumption increases with his effective income (or savings from spending less on gasoline). However, the increase in gasoline consumption does not clearly indicate whether gasoline is normal or inferior, as the consumption increase could be due to the lower price directly rather than a change in income effect.

All Else Equal, When the Price of Gasoline Falls, Brian