Question

Charley buys only milk and cereal. Milk is a normal good, while cereal is an inferior good. When the price of milk rises, Charlie buys Select one: a. less milk, and more cereal. b. less milk, but the impact on cereal is ambiguous. c. less of both goods. d. more milk, and less cereal.

Answer 1

Answer:A. less milk, and more cereal.

Explanation: Goods are classified as NORMAL GOODS AND INFERIOR GOODS. Normal goods are goods where are of very high quality and standard but are generally expensive, consumers pay more for the consumption of normal goods.

INFERIOR GOODS are goods that are of low quality and standard,they are generally cheap and does not require the consumers to pay more for the goods or service rendered.

The QUALITY DEMANDED FOR INFERIOR GOODS INCREASES AS THE INCOME OF CONSUMERS DECREASES. Charley will Demand less of milk and more of cereals.