Question

Many gourmet shops go out of business during recessions since they sell almost exclusively Multiple Choice inferior goods. normal goods. substitutes. complements.

Answer 1

The answer is normal goods.

A normal good, often known as a necessary good, refers to the degree of demand for the good in relation to wage growth or contraction rather than the quality of the good itself.

The relationship between income and demand for a typical good is elastic. To put it another way, changes in income and demand are connected positively or move in the same direction.

The amount by which the quantity demanded for a good changes in response to a change in income is measured as income elasticity of demand. It is employed to comprehend alterations in consumption habits brought by variations in purchasing power.

The income elasticity of demand for a typical good is positive but less than one.

Therefore, Normal goods demand will be more at the point during economic growth. So, inferior goods are sold more at the time of recessions due to less income.

Hence, in the given scenario, where Many gourmet shops go out of business during recessions since they sell almost exclusively normal goods.

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