Answer to Question #286645 in Accounting for akein

Question

You are the manager of a car dealership that sells luxury automobiles, which are normal goods. Although a recession is expected next year, you expect your client's incomes to increase over the coming year. What will you do about ordering cars for next year as compared to last year? Why?

Answer 1

Solution:

A normal good is one whose consumption increases when consumer income increases. Therefore, when you expect your client’s incomes to increase over the coming year, this means that there will be an increase in automobiles demand.

As such, you should order as many luxury automobiles as possible so as to meet the expected increase in their demand and increase revenues.