Question

1. Suppose, you work as an agricultural market analyst in Michigan. You find that last year the average income level in your state rose from $25,000 to $36,000 and the quantity of beef consumed in a year by an average person in Michigan rose from 60lbs to 70lbs.

1. What is the income elasticity of beef in Michigan? (use IED formula, NOT MIDPOINT FORMULA. Midpoint formula is usually used only for PED).

Write down the formula that you are using, show all calculations and indicate unit of account of your answer.                                                                                                                                                                                                                        

Answer:

2. Do your findings show that for consumers in Michigan beef is a normal good or an inferior good? (circle the correct answer):

Answer:   

1. Normal and necessity
2. Normal and luxury
3. Inferior
4. None of the above

1. How would you interpret your finding on income elasticity of demand for beef in Michigan? Fill in the blanks

Answer:                                                                                                                                   

A 1% increase in________________leads to a(n)______________in__________________by____%.

A 1% decrease in________________leads to a(n)______________in__________________by____%.

Answer 1

1. How would you interpret your finding on income elasticity of demand for beef in Michigan? Fill in the blanks

Answer:                                                                                                                                   

A 1% increase in___income_____________leads to a(n)___increase___________in__________quantity demanded of beef________by___0.38_%.

A 1% decrease in_________income_______leads to a(n)_______decrease_______in_______quantity demanded of beef___________by___0.38_%.