Asked by Jorge Ortez on May 04, 2024
Verified
When the economy suffers a downturn and the incomes of many people decrease,vacationers are more likely to take car trips than to fly.Which statement provides one possible explanation for this phenomenon?
A) Air travel and travel by car are complementary goods.
B) Air travel and travel by car are both normal goods.
C) Air travel is a normal good and travel by car is an inferior good.
D) Air travel is an inferior good and travel by car is a normal good.
Inferior Good
A type of good whose demand decreases as consumers' income increases, opposite to normal goods.
Normal Good
A good for which demand increases when consumer income rises, and falls when consumer income decreases.
Complementary Goods
Products or services that are typically consumed together because the use of one enhances the use of the other.
- Recognize the difference between normal goods and inferior goods, and how income changes affect their demand.
Verified Answer
JN
Jennica NewkirkMay 08, 2024
Final Answer :
C
Explanation :
When incomes decrease, people tend to shift from purchasing normal goods to inferior goods. In this case, air travel is a normal good, meaning that as incomes increase, people are more likely to spend more on air travel. On the other hand, travel by car is an inferior good, meaning that as incomes decrease, people are more likely to shift from air travel to travel by car which is a cheaper alternative.
Learning Objectives
- Recognize the difference between normal goods and inferior goods, and how income changes affect their demand.