Question

Sales of more expensive organic produce tend to increase when the economy is doing well, while sales of lower-priced store brand produce increase when the economy is not doing well. This is an example of how:

a) Elasticity impacts demand
b) Income influences consumer choices
c) Externalities affect market trends
d) Price discrimination shapes consumer behavior

Answer 1

The shift in produce purchases based on economic conditions illustrates how income influences consumer choices, reflecting a positive income elasticity of demand for normal goods and negative for inferior goods.

Step-by-step explanation:

The increase in sales of expensive organic produce when the economy is doing well, and the increase in sales of lower-priced store brand produce when the economy is not doing well, is an example of how income influences consumer choices. When consumers have higher income, they tend to buy more premium products because the price becomes less elastic for them, suggesting a positive income elasticity of demand for normal goods. Conversely, when their income is lower, people shift to goods that are more cost-effective, which may be referred to as inferior goods, due to their negative income elasticity of demand.