Final answer:
The statement that consumers only buy apples and bananas is false. Consumers buy a variety of goods and services. Goods are categorized as normal goods with positive income elasticity, and among these, necessity goods have an income elasticity less than one, whereas luxury goods have an income elasticity greater than one.
Step-by-step explanation:
Regarding the statement whether consumers in the economy buy only two general types of products: apples and bananas, the answer is False. Consumers purchase a diverse range of products and services to meet their various wants and needs.
Economists define normal goods as having a positive income elasticity. Income elasticity of demand measures how the quantity demanded of a good changes as consumer income levels change. Normal goods are further classified into two categories based on their income elasticity:
- Necessity Goods: These are normal goods with an income elasticity of less than one. As incomes rise, the demand for these goods will increase but at a slower rate than the increase in income. Examples include basic food products, clothing, and utilities.
- Luxury Goods: These are normal goods with an income elasticity of more than one. This means that as consumer income goes up, the demand for these goods increases at a faster rate than the income itself. Examples include high-end electronics, expensive cars, and designer clothing.
Consumers, in their role as economic agents, participate in markets by buying products to satisfy their needs and wants. Goods can be classified as consumer goods, which are intended for personal use, or capital goods, which are used to produce other goods and services. Further, consumer goods can be either durable goods or non-durable goods, depending on their expected lifespan.