Question

Ike's Tropical Foods specializes in the wholesale distribution of goods, such as rice, and beans.

The firm's manager is concerned about an article he read in this morning's Wall Street Journal indicating that the incomes of individuals in the lowest income bracket are expected to increase by10% over the next year.

While the manager is happy to see this group of individuals do well, he is concerned about the impact it will have on his sales.

What do you think is likely to happen to the price of products sold by Ike's Tropical Foods? Explain

Answer 1

The price of products sold by Ike's Tropical Foods is likely to decrease in the future.

Step-by-step explanation:

Products that Tropical Foods specializing in is Inferior Goods which is goods whose demand will decrease following the increase in consumers' income.

The reason while rice and beans are Inferior Goods are because these are low-priced products complementing low-priced meals. As its consumers' income increases, people may consume less low-priced food which includes rice and beans, instead, they switch to consuming more expensive food like meats, milks, eggs...

So, as incomes of individuals in the lowest income bracket are expected to increase by 10% over the next year, these people may consume less price and bean, so, demand for these products will decrease and price will fall subsequently.