Suppose the Price of a Container of Strawberries Rises from $2

question 149

Multiple Choice

Suppose the price of a container of strawberries rises from $2 to $2.50 and the price of a bag of apples rises from $4 to $5. If the CPI rises from 150 to 175, what will people likely buy?

• A) more strawberries and more apples
• B) more strawberries and fewer apples
• C) less strawberries and more apples
• D) less strawberries and fewer apples

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Definitions:

Demand Elasticity

A metric for assessing the reaction of a good's demanded quantity to its price adjustments.

Income Elasticity

A measure of how the demand for a good or service changes with a change in consumers' income.

Normal Good

A type of good for which demand increases when consumer income rises, and decreases when consumer income decreases.

Inferior Good

A type of good for which demand decreases as the income of consumers increases, opposite to normal goods.