Due to a tuition rise, most students at a college find themselves with less disposable income. As a result, most of them eat more frequently at the school cafeteria and less often at restaurants.

Question

BlackTom AI · Accepted Answer

The scenario describes a change in consumer behavior due to lower disposable income after a tuition rise, leading students to eat more frequently at the school cafeteria and less often at restaurants.

Option 1: 'Restaurant meals must be a necessity good.' This statement claims restaurant meals are a necessity good, but the given information focuses on how demand shifts with income changes, not on the basic necessity status of restaurant meals. The pattern described (shifting toward cheaper options as income falls) does not support labeling restaurant meals as a necessity.

Option 2: 'Cafeteria meals must be a necessity good.' A necessity good is typically something that consumers buy regardless of income changes; demand remains relatively stable. The described increase in cafeteria meal consumption as income decreases suggests the opposite behavior, indicating cafeteria meals behave more like an inferior good in this context, not a necessity.

Option 3: 'Restaurant meals must be an inferior good.' An inferior good would see demand decrease as income rises and increase as income falls. While restaurant meals might conceivably be affected by income, the scenario specifically notes a rise in cafeteria consumption with lower income, not an increase in restaurant meals. Therefore, this option does not align with the observed shift.

Option 4: 'Cafeteria meals must be an inferior good.' This aligns with the logic: as disposable income falls, consumers substitute toward cheaper options (cafeteria meals) and demand for these less expensive goods rises, characteristic of an inferior good in standard consumer theory.

In summary, the described income-driven substitution pattern points to cafeteria meals behaving as an inferior good, whereas the other statements mischaracterize the relationship between income and the goods in question.

Due to a tuition rise, most students at a college find themselves with less disposable income. As a result, most of them eat more frequently at the school cafeteria and less often at restaurants.

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Due to a tuition rise, most students at a college find themselves with less disposable income. As a result, most of them eat more frequently at the school cafeteria and less often at restaurants.

View Explanation

Log in for full answers

Similar Questions

Suppose Diet Dr. Thunder soda is an inferior good. If the income of consumers increases, how will this affect the demand of Diet Dr. Thunder?

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If the economy goes into a recession and incomes fall, what happens in the markets for inferior goods?

If a decrease in income increases the demand for a good, then the good is

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