Question

When John first starts his job, he rides the bus wherever he goes. However, after one year, John receives a promotion and a pay raise, leading to an increase in his annual income. As a result of his pay raise, John decides to drive wherever he goes instead of riding the bus This behavior would indicate that to John, a bus ride is a__________ a good.
a. ceteris paribus
b. complementary
c. Inferior
d. normal

Answer 1

Answer:

c. Inferior

Explanation:

Based on the information provided it can be said that this behavior would indicate that to John, a bus ride is an inferior good. This term by definition is a good whose demand decreases when consumer's income rises. Since John received an increased salary with his promotion, he is now able to afford to be able to drive instead of taking the bus. Therefore his demand for taking the bus has drastically decreased.