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If Jennie spends her income on ice cream and biscuits, and the price of ice cream is three × the price of biscuits,

a) Ice cream is inferior
b) Biscuits are inferior
c) Both goods are normal
d) Insufficient information provided

User Anisart
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1 Answer

3 votes

Final answer:

Without information on how Jennie's demand for ice cream and biscuits changes with income, it is impossible to classify them as inferior or normal goods. The distinction between inferior and normal goods is based on income-consumption patterns.

Step-by-step explanation:

The question does not provide sufficient information to determine whether ice cream or biscuits are inferior goods or normal goods. In economics, whether a good is inferior or normal depends on how a consumer's demand for that good changes as their income changes. Given that we know the price ratio between ice cream and biscuits, without additional information on how Jennie's consumption of these goods changes with her income, we cannot determine the inferiority or normality of these goods.

Using an example from a different scenario, if Lilly, a hypothetical consumer, faced an increase in income and reacted by consuming fewer doughnuts (a good), then doughnuts might be considered an inferior good for her. Conversely, if Lilly’s consumption of books increased with her income, then books would be considered a normal good for her. The terms inferior good and normal good are based on income-consumption patterns, not on price ratios or personal preferences alone.

User Valar Morghulis
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