Question

During the 2008 recession the demand for ice cream went down, the demand for shampoo stayed the same, and the demand for beer increased. The increase in the demand for beer caused the price of beer to increase. The increase in the price of beer caused the demand for wine to decrease and the demand for soda to increase. Based on this information, match each product or pair of products to the term that best describes the product or the relationship between the 2 products.

- A. B. C. D. E. Ice Cream
- A. B. C. D. E. Shampoo
- A. B. C. D. E. Beer
- A. B. C. D. E. Beer and Wine
- A. B. C. D. E. Cheese and Wine

Answer 1

Answer and Explanation:

The classification is as follows:

1. The ice cream should be considered as the normal good as when the demand of the ice cream is reduced when there is the recession that means the income of the people is also reduced

2. The shampoo is considered to be the neutral good as the demand not impacted because of the recession

3. The beer should be considered as the inferior good as because of the recession the demand should increased but the income should be decreased

4. The beer and wine are complementary goods for each other that means if the price of the beer is rised so the demand of the wine is reduced and vice versa

5. The beer and soda should be substitute goods that means if the price of the beer is rise so the demand of the soda should also be rised