You purchase both potatoes and gasoline regularly. Your income increases, and you purchase more gasoline. This means that:
A) Gasoline has a negative substitution effect
B) Potatoes are normal goods
C) Gasoline is inferior
D) Gasoline is normal

Question

Quizplus · Accepted Answer

When an individual's income increases, they tend to purchase more of both normal goods and inferior goods. Gasoline is a normal good, so the increase in its consumption is consistent with the theory of the income effect. This theory explains that as an individual's income increases, their purchasing power also increases, allowing them to purchase more goods and services. Therefore, choice D is correct.

You Purchase Both Potatoes and Gasoline Regularly