The following table shows a demand schedule for a normal good.

Price Quantity demanded

$23 70 a 90 19 110 7 130

a. Do you think that the increase in quantity demanded (say, from 90 to 110 in the table) when price decreases (from $21 to $19) is due to a rise in consumers’ income? Explain clearly (and briefly) why or why not.

b. Now suppose that the good is an inferior good. Would the demand schedule still be valid for an inferior good?

c. Lastly, assume you do not know whether the good is normal or inferior. Devise an experiment that would allow you to determine which one it was. Explain. g. In recent years, the number of car producers in China has increased rapidly. In fact, China now has more car brands than the United States. In addition, car sales have climbed every year and automakers have increased their output at even faster rates, causing fierce competition and a decline in prices. At the same time, Chinese consumers’ incomes have risen. Assume that cars are a normal good. Draw a diagram of the supply and demand curves for cars in China to explain what has happened in the Chinese car market.