This is a simple question, definitional really. If income increases,
she buys more of goods that she considers normal and fewer of
those she considers inferior. Since she considers tofu normal,
she buys more of it; and since she considers peanut butter an inferior
good, she purchases less of it.
14. Jane considers tofu a normal good and peanut butter an inferior
good. We can predict that with an increase in her income she will
consume:
- more of both goods. Only if both are normal, which they aren't according to the question.
- less of both goods. Only if both are inferior, which they aren't according to the
question.
- she will not change her consumption of peanut butter Only if her income elasticity for peanut butter is exactly zero,
meaning it is neither normal nor inferior.
- more peanut butter and less tofu. This would only work if peanut butter were the normal good and
tofu the inferior.
- more tofu and less peanut butter. Correct.
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