As the economy emerged from the most recent recession, household income rose by 6 percent. Over the same period, total expenditures on beef increased by 3 percent. Assuming that all other economic variables were held constant,
A) the income elasticity of demand must be equal to 2.
B) beef must be a normal good.
C) beef must be an inferior good.
D) Both A and B are correct.

Question

Quizplus · Accepted Answer

Beef is considered a normal good because as household income rose, expenditures on beef also increased, indicating that people buy more beef as their income increases. This is characteristic of a normal good. The information provided does not allow us to calculate the income elasticity of demand directly, so we cannot confirm choice A, and there is no indication that beef is an inferior good, which would imply that demand decreases as income increases, ruling out choice C.

As the Economy Emerged from the Most Recent Recession, Household