Final answer:
To determine if food and alcohol are complements or substitutes and whether they are normal or inferior goods, observe the consumption changes in response to price changes and income variations. For complements, the consumption of both goods would reduce if the price of one increases. For normal goods, consumption increases with income, while for inferior goods, it decreases.
Step-by-step explanation:
The question at hand involves understanding whether food and alcohol are complements or substitutes, and whether they are normal or inferior goods, based on the given budgetary constraints and price changes. Starting with the initial scenario where both food and alcohol are priced at $4 and the consumer has $34 to spend.
Upon the increase in the price of alcohol to $7, if the consumer reduces consumption of alcohol and also reduces the consumption of food, it implies that they are likely complements, since the increase in the price of one has decreased the demand for the other.
As for the income effect, when the consumer's income is increased to $58, if the consumer chooses to buy more of both food and alcohol, these goods would be considered normal, as consumption increases with an increase in income. However, if consumption of these goods decreases with an increase in income, they would be classified as inferior goods, since the consumer may opt for better-quality or different goods instead.
The initial scenario provided about Alphonso's budget problem with burgers and bus tickets serves as an analogy to illustrate a consumer's budget constraint and choice preference between two goods under a fixed income.