Suppose You Know I Am Only About Consumption This Year

question 14

Essay

Suppose you know I am only about consumption this year and consumption next year.Suppose also that I have an income this year but do not expect to have an income next year.Explain your answers.​
a.You notice that I save more after the interest rate falls.Can you tell whether "consumption now" is a normal, inferior or Giffen good?
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b.Suppose I also received an unexpected raise at work and you overhear me say: "Cool, I am even Steven.Now that I have my raise, I am just as happy as I was before the interest rate fell and I did not yet have a raise." Without knowing anything more, can you tell whether I consume more or less next year than I would have consumed had neither of the two changes happened?

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Definitions:

Market

A market is a place or system where parties engage in exchange of goods, services, or information, typically determined by the forces of supply and demand.

Inventory Valuing

Refers to the practice of assessing and reporting the value of a company's inventory using specific methods like FIFO (First In, First Out) or LIFO (Last In, First Out).

Consignor

The name for the manufacturer in a consigned inventory arrangement.

Consignment

An arrangement in which goods are left in the possession of another party to sell, but the consignor retains ownership until the goods are sold.