Carlos consumes only cheese and crackers.

a. could cheese and crackers both be inferior goods for carlos? explain.

b. suppose that cheese is a normal good for carlos while crackers are an inferior good. if the price of cheese falls, what happens to carlos's consumption of crackers? what happens to his consumption of cheese? explain.

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Business

Tara Solomon

16 May, 21:57

Carlos consumes only cheese and crackers.

a. could cheese and crackers both be inferior goods for carlos? explain.

b. suppose that cheese is a normal good for carlos while crackers are an inferior good. if the price of cheese falls, what happens to carlos's consumption of crackers? what happens to his consumption of cheese? explain.

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Enrique Duffy · Answer 1

A. The cheese and crackers that are being consumed by Carlos is not considered to be inferior goods because when there is a time that his income may rise, he will likely consume other products aside from it.

B. If the price of the cheese falls, what will likely happen is that there will be a presence of substitution effect of where the crackers will be fewer consumed and the cheese will be consumed more. When there is a presence of income effect on the other hand, the cheese will be consumed more as this will be considered as a good that is normal and the crackers to be consumed fewer as this will be classified as an inferior good. The likely outcome of it in both scenarios, Carlos will still consume fewer crackers and the cheese to be more consumed.