Question

in the two-period model, if consumption in both periods is a normal good, then an increase in income in period two: does not increase consumption in either period. increases consumption in period one only. increases consumption in period two only. increases consumption in both periods.

Answer 1

increases consumption in both periods.

Step-by-step explanation:

A normal good is any product or service whose demand increases as consumers' income increases. The demand for a normal good will also increase due to the improvement in economic conditions in an economy.

A normal good is regarded to be of high utility value. Its consumption provides consumers with greater satisfaction. As a result, if consumer's income increase, demand for normal goods increases. Should consumption increase in a period, the demand will increase. The demand will continue to rise if incomes increase.