Managerial economics problem, Managerial Economics

Suppose there are two types of T-shirts: branded ones and unbranded ones and people allocate their spending in a way that they buy both types. Suppose the price of branded T-shirts goes up, but the price of unbranded T-shirts remains the same. What we see then is that after this price change people buy fewer unbranded T-shirts than before.

Can we conclude from this that unbranded T-shirts are *not*

(a) Normal Goods

(b) Inferior Goods

(c) Giffen Goods

If you think, we cannot conclude any of these from the above facts, what information do you think would be necessary to decide whether unbranded T-shirts are normal, inferior or Giffen goods? Please illustrate your answers.

Posted Date: 3/9/2013 5:26:28 AM | Location : United States







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