Suppose European incomes increase annually by 4 percent per year,and as a result,U.S.farm exports to Europe rise by 2 percent annually.The U.S.farm exports are
A)Inferior goods.
B)Normal goods.
C)Price-elastic.
D)Substitute goods.

Question

Quizplus · Accepted Answer

U.S. farm exports to Europe rise as a result of European incomes increasing, indicating that they are normal goods. The fact that the increase in U.S. farm exports is less than the increase in European incomes suggests that U.S. farm exports are price-inelastic. There is no indication in the scenario that U.S. farm exports are inferior goods or substitute goods, so choices A and D can be eliminated. Therefore, the best answer is B.

Suppose European Incomes Increase Annually by 4 Percent Per Year,and