Question

Suppose that you really enjoy going to the movie theater, but at your current level of income, it is more affordable to rent a movie at home. Then suppose you receive a promotion and your income rises. With this extra money, you go to the movie theater more often instead of renting movies. This scenario demonstrates that to you, rental movies are a(n) ________ good and movies at the movie theater are a(n) _________ good.

Answer 1

inferior, normal

Step-by-step explanation:

Consumers tend to spend more or less on a commodity when their income level changes. This is as a result of preference that is restricted by income level.

Based on this there are 3 types of goods: inferior, normal, and necessity.

Inferior goods are ones that a consumer will abandon for other goods when income rises.

Normal goods are the ones where demand increases as income rises.

Necessity are goods whose demand remains constant despite income changes.

In the give scenario therefore rental movies are inferior goods while going to the movie theatre is a normal good.