Question

For each scenario, calculate the income elasticity of demand, determine whether the good is inferior or normal, and classify the good's income elasticity. When calculating the income elasticity of demand, use the midpoint formula. Round your answers to the nearest hundredth.

Sylvia's annual salary increases from $100,000 to $109,500, and she decides to increase the number of vacations she takes per year from three to four. Calculate her income elasticity of demand for vacations.

income elasticity_vacations=

Vacations are a

normal good or inferior good?

As a good, vacations are

income-elastic, income-inelastic or neither

Blake eats two bags of generic potato chips each day, and does not purchase any name-brand chips. Blake's hourly wage increases from $7 to $15, and he decides to eat one name-brand bag and one generic-brand bag each day. Calculate Blake's income elasticity of demand for generic potato chips.

income elasticity_{generic chips}=

Generic potato chips are a

inferior good or normal good

As a good, generic potato chips are

income-inelastic, income inelastic, or neither

Answer 1