In: Economics
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?