The Setrite Corporation produce chairs. An economist working for the firm predicts that if people's incomes rise next year, then the demand for our chairs will for our chairs will increase ceteris paribus The accuracy of the economist's prediction depends on whether the chairs Setrite Produce ?
Correct answer: B. are normal goods
- A. have few substitutes.
- B. are normal goods
- C. have few complementary goods.
- D. have many complementary goods.
Explanation
The prediction that demand will rise with consumers' incomes is accurate if chairs are normal goods. Demand for an inferior good would fall as income increases.
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Individual consumers, firms and markets are examined through demand and supply, elasticity, consumer choice, production, costs, revenue and the determination of prices and output. The topic also covers market structures such as perfect competition, monopoly and oligopoly, plus market failure, externalities and the distinction between microeconomic decisions and economy-wide outcomes.
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