Stefan Consumes Only Cheese and Crackers

question 40

Essay

Stefan consumes only cheese and crackers.
a) Could these both be inferior goods for Stefan? Explain.
b) Suppose that cheese is a normal good for Stefan while crackers is inferior. If the price of cheese falls, explain what happens to Stefan's consumption of both cheese and crackers.

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Definitions:

Adjustment Technique

Methods or procedures used to modify data, processes, or systems in order to correct errors or enhance functionality.

Mean-Variance Efficient Portfolio

An investment portfolio optimized for the highest expected return for a given level of risk, based on modern portfolio theory.

Covariances

A measure of how two securities move in relation to each other, indicating the degree to which their returns are interconnected.

Investments

The act of allocating resources, usually money, with the expectation of generating an income or profit.