Joe consumes 48 units of food and 12 units of clothing.If food is an inferior good:
A) Joe would strictly prefer receiving a $10 gift certificate at a clothing store to receiving $10 in cash.
B) Joe would strictly prefer receiving $10 in cash to receiving a $10 gift certificate at a clothing store.
C) Joe would be indifferent between receiving a $10 gift certificate at a clothing store and receiving $10 in cash.
D) upon receiving a $10 gift certificate at a clothing store, Joe would consume less clothing and more food.

Question

Quizplus · Accepted Answer

Since food is an inferior good, as Joe's income increases (such as by receiving $10 in cash), he would prefer to spend more on normal goods (like clothing) rather than on more of the inferior good (food). Therefore, having the flexibility of $10 in cash is more valuable to him than being restricted to spending it on clothing, as it allows him to allocate his resources according to his preferences.

Joe Consumes 48 Units of Food and 12 Units of Clothing.If