Question

A 10 percent increase in income leads to a 15% decrease in the quantity of macaroni and cheese demanded but no change in the price of macaroni and cheese. From this information, we can assume:(A) macaroni is a normal good and price elasticity of demand is greater than 1.(B) macaroni is an inferior good and price elasticity of supply is equal to zero.(C) macaroni is an inferior good and price elasticity of supply is infinite.(D) macaroni is an inferior good and price elasticity of demand is less than 1.

Answer 1

Answer:

Here the correct answer is C)

Explanation:

Inferior goods can be described as those goods whose demands decreases , when the income of the customers increases. These goods are related to negative income elasticity, they have inverse relationship with price.

Price elasticity of supply is infinite means that there will be change in the price and goods would be supplied at one or same price only. The graph of this price elasticity of supply would be horizontal.

In the given above question it is quite clear that macaroni and cheese are inferior goods and their price elasticity of supply is infinite ( means they will be supplied at same or one price ).

Answer 2

Answer:(B) macaroni is an inferior good and price elasticity of supply is equal to zero

Explanation:due to rise in income, people preferred other goods. This makes it an inferior good. Price elasticity is zero as there is no change in price of good.