The owner of a kayak tour business has been looking over the latest data from the Census, which reported that income in the area where she is based has increased by 20%. Assuming that participating in a kayak tour is a normal good, which of these would be an accurate prediction of what could happen to kayak tour sales, ceteris paribus?
A) Since incomes have increased by 20% in the area, the owner can expect to see a decrease in sales, ceteris paribus.
B) Since incomes have increased by 20% in the area, the owner can expect to see no change in sales, ceteris paribus.
C) Since incomes have increased in the area, the owner can expect to see a 20% increase in sales, ceteris paribus.
D) Since incomes have increased by 20% in the area, the owner can expect to see an increase in sales, ceteris paribus.

Question

Quizplus · Accepted Answer

Given that participating in a kayak tour is considered a normal good, an increase in income would generally lead to an increase in demand for such goods, hence the owner can expect to see an increase in sales, assuming all other factors remain constant (ceteris paribus).

The Owner of a Kayak Tour Business Has Been Looking