Chapter 2R, Problem 2CTQ

To determine

The question requires us to determine the impact of increased income on demand for Folgers and Starbucks coffee and also determine the type of these goods.

Explanation of Solution

A person demands more of normal goods when his income increases. In the given case, both Folgers coffee and Starbucks coffee are normal goods but also good substitutes for each-other. So, a higher income will encourage the consumer to demand more of these coffees.

The consumer’s taste will be the deciding criterion here meaning which coffee he prefers depends on his taste and the price of the coffee.

Economics Concept Introduction

An increase in income will lead to a higher demand for the normal goods.