Question

Andrew, a college student, loves drinking coffee late at night to study for exams. Having no income, he is used to buying cheap bad tasting coffee, such as Beanlightened, that he needs to grind and brew himself. The coffee tastes putrid but, with enough cream and sugar, Andrew is able to tolerate it. Occasionally, he does go out to Starbucks when he has spare money. After graduation, Andrew gets a job working at a database firm as a programmer. His income is now a healthy $75,000 a year and he decides he\'s had enough bad tasting coffee. He ends up buying coffee daily from Starbucks even though it costs significantly more than Beanlightened.1. In economic terms, Starbucks coffee is a(n) _________ __________, while Beanlightened coffee is a(n) _______ _________.2. Andrew's demand for Starbucks coffee changed as a result of an increase in his __________.

Answer 1

Answer: (1) Normal Good

(2) Inferior Good

(3) Increase in his Income Level

Step-by-step explanation:

With no income, Andrew prefer to drink Bean-lightened coffee but once he is able to earn something then he prefers Starbucks coffee. This shows that Bean-lightened coffee is an inferior good for Andrew and Starbucks coffee is a normal good for Andrew.

We know that income of an individual and demand for normal good directly related with each other and on the other hand, income of an individual and demand for inferior good inversely related with each other.

So, the consumption of Starbucks coffee increases as his income increases.