Final answer:
For Max, hot dogs are an 'inferior good' because his demand for them decreases as his income rises. This is opposed to a 'normal good,' which would see an increase in demand with increased income. The correct answer is option: c) an inferior good.
Step-by-step explanation:
If Max's demand for hot dogs falls as his income rises, then for Max, hot dogs are an inferior good. When income increases, and the demand for a good decreases, it indicates that the good is considered inferior, as people tend to substitute it with more desirable goods. This contrasts with a normal good, where demand increases as income rises.
To clarify, a normal good is a good in which the quantity demanded rises as income rises, and in which quantity demanded falls as income falls. However, depending on individual preferences such as those of Kimberly mentioned in the reference, consumers may react differently to income changes in their demand for different goods. The main point here is that for Max specifically, hot dogs become less desirable as he has more money to spend.