A. Assume that in a typical year, a teenager purchases 100 song-downloads and buys 80 cheese...

A. Assume that in a typical year, a teenager purchases 100 song-downloads and buys 80 cheese pizzas subject to a given annual allowance. With the theory of consumer behavior, if cheese pizza is an inferior good, graphically illustrate (manually (hand) drawn graph/diagram) and carefully explain why a teenager would prefer a $50 cash gift over a $50 gift certificate at a local pizza store.

B. In this case, explain why the local pizza store’s manager would prefer in-store gift certificates over cash redeemable gift certificates?

Expert Solution

Rahul Sunny answered 2 years ago

Assume that in a typical year, a teenager purchases 100 song-downloads and buys 80 cheese pizzas...

Assume that in a typical year, a teenager purchases 100 song-downloads and buys 80 cheese pizzas subject to a given annual allowance. With the theory of consumer behavior, if cheese pizza is an inferior good, graphically illustrate and carefully explain why a teenager would prefer a $50 cash gift over a $50 gift certificate at a local pizza store. In this case, explain why the local pizza store’s manager would prefer in-store gift certificates over cash redeemable gift certificates?

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