Question

An economist for a bicycle company predicts that, other things equal, a rise in consumer incomes will increase the demand for bicycles. This prediction is based on the assumption that:

A. Bicycles are normal goods
B. Bicycles are inferior goods
C. Bicycles are complementary goods
D. Bicycles are substitute goods

Answer 1

The economist's prediction assumes bicycles are normal goods because demand for these goods increases with a rise in consumer incomes.

Step-by-step explanation:

The prediction by the economist for a bicycle company that a rise in consumer incomes will increase the demand for bicycles is based on the assumption that bicycles are normal goods. This is because, as income increases, the demand for normal goods tends to increase as well.

Luxury items like luxury cars and fine jewelry often show a pronounced effect, but even everyday items like bicycles are expected to see a rise in demand with increased consumer income. On the other hand, inferior goods would see a decrease in demand as income rises, while complementary goods and substitute goods have demand patterns that depend on changes in the price or demand of other goods.