According to the U.S. Energy Information Administration, the average price of a gallon of gasoline increased from
Question:
According to the U.S. Energy Information Administration, the average price of a gallon of gasoline increased from $2.24 in January 2019 to $2.85 in May. For the following questions, assume that no factor that affects the demand for gasoline, other than its price, changed during the months from January to May 2019.
a. If households in the United States increased their consumption of gasoline during these months, can we conclude that for these households, gasoline is a normal good? Briefly explain.
b. If households decreased their consumption of gasoline during these months, can we conclude that for these households gasoline is an inferior good? Briefly explain.
c. If households decreased their consumption of gasoline during these months, can we conclude that for these households gasoline is a Giffen good? Briefly explain.
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