MULTIPLE CHOICE (identify the one best answer below and explain your reasoning for each option): If the economy experiences a boom and incomes rise substantially, what happens in the markets for both normal and inferior goods?

MACROECONOMICS FOR TODAY

10th Edition

ISBN:9781337613057

Author:Tucker

Publisher:Tucker

Chapter3: Market Demand And Supply

Section: Chapter Questions

Problem 20SQ

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Concept explainers

Perfect Competition

It is the structure of the market that is said to exist when with many buyers and sellers exchanging similar commodities and its price is fixed by the market forces, demand, and supply, and a single firm cannot cause an impact over the price or market value of the homogenous product. This structure of the market is called perfect competition.

Question

MULTIPLE CHOICE (identify the one best answer below and explain your reasoning for each
option): If the economy experiences a boom and incomes rise substantially, what happens in the
markets for both normal and inferior goods?
a. In both markets, prices fall, quantities rise.
b. In both markets, prices and quantities both fall.
c. In both markets, prices rise, quantities fall.
d. In one market both prices and quantities rise, in the other both prices and quantities fall.
e. None of the above.

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