When an economy is in a recession, individuals taking a vacation are more likely to take car trips over airplane trips. The most reasonable explanation is ___________________________.

Air travel and car travel are complementary goods.

Air travel is an inferior good and car travel is a normal good.

Air travel is a normal good and car travel is an inferior good.

Air travel and car travel are both normal goods.

1 answer

The most reasonable explanation is Air travel is a normal good and car travel is an inferior good.

In a recession, individuals typically have less disposable income, which leads them to prefer cheaper vacation options. Since car travel is generally less expensive than air travel, individuals are more likely to choose car trips over airplane trips during an economic downturn. Normal goods are those for which demand increases when income rises (such as air travel), while inferior goods see an increase in demand when income decreases (such as car travel in this context).