In 2000, Bruce spent his income on two goods, x and y.Between 2000 and 2001, the price of good x rose by 8% and the price of good y rose by 8%.In 2001, Bruce bought the same amount of x as he bought in 2000, but he bought more of good y than he had bought in 2000.

Question

Quizplus · Accepted Answer

DA) The fact that Bruce bought more of good y even after its price increased suggests that y is a normal good, as typically, consumers buy more of a normal good as their income increases, assuming Bruce's income increased or his preferences changed in favor of y.D) Without information on changes to Bruce's income or his preferences, it's difficult to definitively classify the goods as normal or inferior. Changes in consumption could be due to income changes, substitution effects, or changes in preferences, not just the goods' nature.

In 2000, Bruce Spent His Income on Two Goods, X