Data collected from the economy of Pokerville reveals that a 15% decrease in income leads to the following changes: • A 9% increase in the quantity of spades demanded • A 17% decrease in the quantity of chips 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 Spades -1.67 / -1.6 / 0.6 / 1.67 Normal / Inferior Chips -1.13 / -0.88 / 0.88 / 1.13 Normal / Inferior Aces -1.93 / -0.52 / 0.52 / 1.93 Normal / Inferior Which of the following three goods is most likely to be classified as a luxury good ? Chips Spades Aces
Data collected from the economy of Pokerville reveals that a 15% decrease in income leads to the following changes: • A 9% increase in the quantity of spades demanded • A 17% decrease in the quantity of chips 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 Spades -1.67 / -1.6 / 0.6 / 1.67 Normal / Inferior Chips -1.13 / -0.88 / 0.88 / 1.13 Normal / Inferior Aces -1.93 / -0.52 / 0.52 / 1.93 Normal / Inferior Which of the following three goods is most likely to be classified as a luxury good ? Chips Spades Aces
Chapter5: Elasticity Of Demand And Supply
Section: Chapter Questions
Problem 1.1P: (Calculating Price Elasticity of Demand) Suppose that 50 units of a good are demanded at a price of...
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Using the income elasticity of demand to characterize goods
Data collected from the economy of Pokerville reveals that a 15% decrease in income leads to the following changes:
| • | A 9% increase in the quantity of spades demanded |
| • | A 17% decrease in the quantity of chips 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
|
|---|---|---|
| Spades | -1.67 / -1.6 / 0.6 / 1.67 | Normal / Inferior |
| Chips | -1.13 / -0.88 / 0.88 / 1.13 | Normal / Inferior |
| Aces | -1.93 / -0.52 / 0.52 / 1.93 | Normal / Inferior |
Which of the following three goods is most likely to be classified as a luxury good ?
- Chips
- Spades
- Aces
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