7. Using the income elasticity of demand to characterize goodsData collected from the economy of Cardtown reveals that an 18% decrease in income leads to the following changes:•A 6% decrease in the quantity of horses demanded•A 17% increase in the quantity of clubs demanded•A 29% decrease in the quantity of aces demanded Compute the income elasticity of demand for each good and use the dropdown menus to complete the first column in the following table. Then, based on its income elasticity, indicate whether each good is a normal good or an inferior good. (Hint: Be careful to keep track of the direction of change. The sign of the income elasticity of demand can be positive or negative, and the sign confers important information.)GoodIncome Elasticity of DemandNormal or Inferior GoodHorses Clubs Aces Which of the following three goods is most likely to be classified as a luxury good ?Clubs Aces Horses 7. Using the income elasticity of demand to characterize goodsData collected from the economy of Cardtown reveals that an 18% decrease in income leads to the following changes:• A 6% decrease in the quantity of horses demanded• A 17% increase in the quantity of clubs demanded• A 29% decrease in the quantity of aces demandedCompute the income elasticity of demand for each good and use the dropdown menus to complete the first column in the following table. Then, basedon its income elasticity, indicate whether each good is a normal good or an inferior good. (Hint: Be careful to keep track of the direction of change.The sign of the income elasticity of demand can be positive or negative, and the sign confers important information.)GoodIncome Elasticity of DemandNormal or Inferior GoodHorsesClubsAcesWhich of the following three goods is most likely to be classified as a luxury good ?O ClubsО АcesO Horses

Income elasticity of demand depicts how much consumer responds with the change in his income.

Answered: 7. Using the income elasticity of…

Principles of Microeconomics

7th Edition

ISBN:9781305156050

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter5: Elastic And Its Application

Section: Chapter Questions

Problem 6PA: Suppose that your demand schedule for DVDs is as follows: Price Quantity Demanded (income = 10,000)...

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7. Using the income elasticity of demand to characterize goods

Data collected from the economy of Cardtown reveals that an 18% decrease in income leads to the following changes:

•	A 6% decrease in the quantity of horses demanded
•	A 17% increase in the quantity of clubs demanded
•	A 29% decrease in the quantity of aces demanded

Compute the income elasticity of demand for each good and use the dropdown menus to complete the first column in the following table. Then, based on its income elasticity, indicate whether each good is a normal good or an inferior good. (Hint: Be careful to keep track of the direction of change. The sign of the income elasticity of demand can be positive or negative, and the sign confers important information.)

Good	Income Elasticity of Demand	Normal or Inferior Good
Horses
Clubs
Aces

Which of the following three goods is most likely to be classified as a luxury good ?

Clubs

Aces

Horses

7. Using the income elasticity of demand to characterize goods
Data collected from the economy of Cardtown reveals that an 18% decrease in income leads to the following changes:
• A 6% decrease in the quantity of horses demanded
• A 17% increase in the quantity of clubs demanded
• A 29% decrease in the quantity of aces demanded
Compute the income elasticity of demand for each good and use the dropdown menus to complete the first column in the following table. Then, based
on its income elasticity, indicate whether each good is a normal good or an inferior good. (Hint: Be careful to keep track of the direction of change.
The sign of the income elasticity of demand can be positive or negative, and the sign confers important information.)
Good
Income Elasticity of Demand
Normal or Inferior Good
Horses
Clubs
Aces
Which of the following three goods is most likely to be classified as a luxury good ?
O Clubs
О Аces
O Horses

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