Question

Andrew, a poor college student, drinks coffee late at night. He has no income and is buying cheap coffee, such as Beanlightened, that he grinds and then brews. The coffee tastes bad but its enough caffeine. He goes to Starbucks occasionally. After he graduates, he gets a job at a database firm as a prgrammer. His income is $75,000 a year. He ends up buying coffee daily at SB. This helps him get a Gold Star Reward Card, which allows him to get free refills. In economic terms, SB coffee is a(n) ____, while Beanlightened coffee is a(n) _____.

Andrew's demand for SB changed as a result of....

Answer 1

According to the situation,

Starbucks coffee is a normal good and Bean-lightened coffee is an inferior good.

A normal good refers to a good whose demand is directly related with the income of an individual. So, an increase in the income of an individual will results in more demand for normal good.

A inferior good refers to a good whose demand is inversely related with the level of income of an individual. So, an increase in the income of an individual will results in less demand for inferior good.

Therefore, when Andrew was a college student, there is no income sources, so he prefer to drink Bean-lightened coffee that is an inferior good. But once he started earning then he prefer Starbucks coffee that is a normal good.

Hence, Andrew's demand for SB changed as a result of Increase in income.