Question

Recall the definitions of normal and inferior goods. During a recession, a person would prefer to work in an industry that produces:

A) Normal goods
B) Inferior goods
C) Luxury goods
D) Necessity goods

Answer 1

Normal goods are those with a positive income elasticity, with necessities having an elasticity of less than one and luxury goods greater than one. Inferior goods see an increased demand as income falls. During a recession, working in industries that produce inferior or necessary goods could be a more stable choice.

Step-by-step explanation:

Economists define normal goods as those with a positive income elasticity, meaning that the demand for these goods increases as consumer income rises. Normal goods can be further categorized based on their income elasticity. Goods with an income elasticity less than one are considered necessities, and those with an elasticity greater than one are called luxury goods. On the other hand, inferior goods are those for which demand decreases as income increases, as consumers opt for more expensive substitutes that they prefer when their income allows.

During a recession, when consumer incomes generally fall, it could be preferable to work in an industry that produces inferior goods or necessity goods, as the demand for these products tends to be more stable or even increase during economic downturns.