Question

Top Ramen is a brand of noodles that is widely considered to be an inferior good with a high salt content. What would happen to the equilibrium price and equilibrium quantity of Top Ramen if income went up and the price of salt decreased?Group of answer choicesa. The equilibrium price goes up and equilibrium quantity goes up.
b. The equilibrium price is indeterminate and equilibrium quantity goes up.
c. The equilibrium price goes down and equilibrium quantity is indeterminate.
d. The equilibrium price is indeterminate and equilibrium quantity goes down.
e. The equilibrium price goes up and equilibrium quantity is indeterminate.

Answer 1

Answer:

c. The equilibrium price goes down and equilibrium quantity is indeterminate.

Explanation:

Inferior good also known as Giffen goods are goods whose demand will not increase even when consumers income increases. Top Ramen noodles is inferior good, which means the demand will not increase even if the income of the consumers increase all things being equal.

With a decrease in the price of salt, demand supply may be affected positively which will bring down the equilibrium price.