Economics: The Basics 1st Edition by Mike Mandel

Exercise 1

The following table reports spending on food in 2006 by households with incomes of less than $70,000 and by households with incomes greater than $150,000. "Food eaten at home" refers mainly to food that is purchased at supermarkets and brought home. "Food eaten away from home" refers mainly to food eaten at restaurants, though it also includes college dining rooms and similar situations.

a) How much do households with incomes of less than $70,000 spend on food eaten at home? Do they spend more on food at home or food away from home?
b) How much do households with incomes greater than $150,000 spend on food eaten away from home? Do they spend more on food at home or food away from home?
c) From this table, would you conclude that food eaten away from home is a normal good, a luxury good, or an inferior good? Is food eaten at home a normal good, a luxury good, or an inferior good? Explain your answers.