In the last chapter, we studied a problem involving food prices and consumption in Sweden in 1850 and 1890.
(a) Potato consumption was the same in both years. Real income must have gone up between 1850 and 1890, since the amount of food staples purchased, as measured by either the Laspeyres or the Paasche quantity index, rose. The price of potatoes rose less rapidly than the price of either meat or milk, and at about the same rate as the price of grain flour. So real income went up and the price of potatoes went down relative to other goods. From this information, determine whether potatoes were NAME 107 most likely a normal or an inferior good. Explain your answer.
(b) Can one also tell from these data whether it is likely that potatoes were a Giffen good?