Question

1. The graph below shows the relationship between vehicle ownership and average income in the USA, Germany, Japan and South Korea. Based on this graph, are vehicles a normal or inferior good? What would the graph look like in the opposite case? 1000 800 Vehicles 600 per 1000 people 1960-2002 400 Japan Germany S.Korea 200 A Germany 1960 S.Korea 10 per-capita income, 1960-2002 (Real $ PPP, thousands) Figure 1

Answer 1

Answer)

In this case, vehicles are a normal good.

Normal goods are those goods whose demand increases as there is an increase in the income of individuals. In other words, there is a positive relationship between the income and demand for the good.

As we can see in the diagram that, the curves are upwards sloping meaning that as the income increases, the ownership of vehicles also increases which happens in the case of normal goods.

If the vehicles would be an inferior good, the demand for vehicles would decrease with the increase in income as shown in the below diagram.

A Торой, rehicles (perioto people) – (1960) USA 2802 (1960 30 (per abita nel