Normal and inferior goods (NORMAL or INFERIOR) goods Raphael enjoys going to the

Question

Normal and inferior goods

(NORMAL or INFERIOR) goods

Raphael enjoys going to the theater to see plays, and he also enjoys going to rock concerts. The following diagram shows two of Raphael's indifference curves for going to plays and concerts. With Raphael's initial budget constraint (BC_1), he chose to go to four concerts and six plays per month (point X). Then his budget constraint shifted to BC_2, and he chose to go to five concerts and three plays per month (point Y). Of the following choices, which could have shifted Raphael's budget constraint from BC_1 to BC_2? Check all that apply. His income decreased while the prices of theater and concert tickets stayed the same. The price of theater tickets increased while his income and the price of concert tickets stayed the same. The prices of both theater and concert tickets increased while his income stayed the same. The price of concert tickets increased while his income and the price of theater tickets stayed the same. Based on Raphael's consumption of plays and concerts after his budget constraint shifted, plays are goods and concerts are goods.

Explanation / Answer

(1) Shift in budget constraint is parallel and slope is the same, which is explained by the fact that:

His income decreased but price of both goods remained the same.

(2) Plays are Normal goods & Concerts are Inferior goods.

With decrease in income, number of plays decreased, so it is normal, but number of concerts increased, so it is inferior.

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