📚 Learning Guide
Understanding Demand and Supply
hard

An increase in consumer income will always lead to an increase in demand for normal goods, regardless of changes in the prices of complementary goods.

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Choose the Best Answer

A

True

B

False

Understanding the Answer

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Answer

When consumer income increases, people generally have more money to spend, which can lead to an increase in demand for normal goods. Normal goods are items that people buy more of when they have more income, like clothing or dining out. Even if the prices of complementary goods, such as burgers and fries, change, the overall demand for normal goods can still rise because consumers feel richer. For example, if someone gets a raise and decides to buy more new clothes, they might still buy the same amount of fries whether or not the price goes up. This shows that higher income can boost demand for normal goods, even if other prices fluctuate.

Detailed Explanation

It's not always true that higher income means more demand for normal goods. Other options are incorrect because This answer suggests that income changes always increase demand.

Key Concepts

Demand elasticity
Income effect
Complementary goods
Topic

Understanding Demand and Supply

Difficulty

hard level question

Cognitive Level

understand

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