Normal or inferior goods?
During an economic downturn, Taco Bell increases sales per outlet and gains overall market share in the fast-food market. By contrast, Compertitors such as McDonald’s and Burger King see their sales and market share decline. Assuming that the relative price of the items sold by the various fast-food chains as well as other factors remain unchanged, does this evidence indicate that the products sold by Taco Bell are normal or inferior goods for the typical consumer? Explain. What about the products sold by McDonald’s and Burger King?
Tagged with: burger king • decline • economic downturn • fast food chains • food market • inferior goods • market share • mcdonald • relative price • taco bell • typical consumer
Filed under: sell my timeshare
This would suggest that Taco Bell products are seen as an inferior good and McDonald’s and Burger King products are normal goods. Recall that when people have more money they buy more normal goods and less inferior goods. The opposite is true, when people have less money they buy less normal goods and more inferior goods. Since this example states there is an economic downturn and Taco Bell sells more, they must offer inferior goods (holding all else constant).