Consumer demand changes by the following amounts after a 15% increase in income: • the quantity demanded of candy canes increases by 5%. • the quantity of chestnuts demanded decreases by 15%. • the quantity of gingerbread cookies increases by 30%. a. Calculate the income elasticity of demand for each of these goods and indicate whether each is a normal or inferior good. b. Based on these elasticities, which one of these goods is a necessity and which one is a luxury?

Consumer demand changes by the following amounts after a 15% increase in income: • the quantity demanded of candy canes increases by 5%. • the quantity of chestnuts demanded decreases by 15%. • the quantity of gingerbread cookies increases by 30%. a. Calculate the income elasticity of demand for each of these goods and indicate whether each is a normal or inferior good. b. Based on these elasticities, which one of these goods is a necessity and which one is a luxury?

ECON MICRO

5th Edition

ISBN:9781337000536

Author:William A. McEachern

Publisher:William A. McEachern

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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