Use the following to answer questions :
-(Figure: Income and Substitution Effects)Use Figure Income and Substitution Effects.Carlos is consuming his optimal consumption bundle at point A when the price of gasoline falls.As Carlos moves to his new optimal consumption bundle,we observe that gasoline:
A) is not an ordinary good.
B) is a normal good.
C) is an inferior good.
D) and good L are complements.

Question

Use the following to answer questions : 
-(Figure: Income and Substitution Effects)Use Figure Income and Substitution Effects.Carlos is consuming his optimal consumption bundle at point A when the price of gasoline falls.As Carlos moves to his new optimal consumption bundle,we observe that gasoline:
A) is not an ordinary good. 
B) is a normal good. 
C) is an inferior good. 
D) and good L are complements.

Quizplus · Accepted Answer

As Carlos moves from point A to point B, he is increasing his consumption of gasoline, indicating that gasoline is a normal good for him. The income and substitution effects reinforce each other, leading Carlos to purchase more gasoline at the lower price. Therefore, option B is the correct choice.

Use the Following to Answer Questions