Suppose There Are Only Two Goods, a and B, and That

question 89

Multiple Choice

Suppose there are only two goods, A and B, and that consumer income is constant. If the price of good A falls and the consumption of good B rises, we can conclude that

• A) B is a normal good.
• B) B is an inferior good.
• C) A is an inferior good.
• D) both A and B are normal goods.
• E) A is a normal good.

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Definitions:

O/I Ratio

In business, often refers to the Operating Income Ratio, a metric used to assess financial performance.

Referent Others

Individuals or groups that people compare themselves to for the purpose of self-evaluation or seeking guidance.

Perceived Inequity

The feeling or belief that an individual's inputs and outputs in a certain situation or relationship are not equitable compared to others.

Perceived Inequity

The feeling or belief that one's inputs and outputs in a relationship or situation are not proportional to those of others.