7. Using the income elasticity of demand to characterize goods Data collected from the economy of Pokerville reveals that a 16% increase in income leads to the following changes: • An 18% increase in the quantity of flops demanded • A 14% decrease in the quantity of spades demanded • A 30% increase in the quantity of diamonds 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.) Income Elasticity of Demand Normal or Inferior Good Good Flops Spades Diamonds PPP
7. Using the income elasticity of demand to characterize goods Data collected from the economy of Pokerville reveals that a 16% increase in income leads to the following changes: • An 18% increase in the quantity of flops demanded • A 14% decrease in the quantity of spades demanded • A 30% increase in the quantity of diamonds 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.) Income Elasticity of Demand Normal or Inferior Good Good Flops Spades Diamonds PPP
Chapter5: Elasticity Of Demand And Supply
Section: Chapter Questions
Problem 4.9P: (Other Elasticity Measures) Complete each of the following sentences: a. The income elasticity of...
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