Sarah gets a salary increase of 20 percent. Before her raise, she purchased 5 pounds of hamburger and 1 pound of beef stew a month. After her raise, she consumes 2 pounds of hamburger and 3 pounds of beef stew a month.
If everything else is held constant, we know that A) hamburger is an inferior good and beef stew is a normal good for Sarah.
B) hamburger is a normal good and beef stew is an inferior good for Sarah.
C) both hamburger and beef stew are normal goods for Sarah.
D) both hamburger and beef stew are inferior goods for Sarah.
Question 2
Economic theory predicts that people make choices in a manner that
A) makes them well liked by others.
B) makes them better off.
C) reflects the fact that resources are unlimited.
D) shows that they do not respond to monetary incentives.
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