Question

Brady, who has ordinary-shaped indifference curves, buys 16 ounces of salt each year. Even when the price of salt doubles, Brady continues to purchase exactly 16 ounces.
To help you answer this question, it may be helpful to use indifference curves and budget constraints to depict Brady's behavior graphically on a sheet of paper.

Which of the following statements is true?

a. Salt is an inferior good for Brady since the income effect is positive.
b. Salt is a normal good for Brady since the income effect is negative.
c. Salt is an inferior good for Brady since the income effect is positive.
d. Salt is a normal good for Brady since the income effect is positive.

Answer 1

Answer:

No option is correct, but I believe that one option was not copied appropriately since A and C are the same (although both are wrong).

The correct answer is Salt is an inferior good for Brady since the income effect is negative.

Explanation:

Brady's demand for salt is perfectly inelastic, in other words, his demand curve for salt is vertical since no matter the price, he always purchases the same amount.

Salt is an inferior good for Brady since the income effect is negative. He will continue to buy salt regardless of its price.