I was wondering if you could help me understand how to answer the last question correctly. I've gotten it wrong on two other questions and I'm not sure why. Also, would it be possible for you to see if my work in the above section is correct, so that I can ensure that is not why the last question is wrong? Thanks! Data collected from the economy of Pokerville reveals that a 15% decrease in income leads to the following changes:• A 1% decrease in the quantity of flops demanded• A 10% increase in the quantity of spades demanded• A 36% 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 GoodFlops0.07NormalSpades-0.67InferiorAces2.4 ▼NormalWhich of the following three goods is most likely to be classified as a luxury good ?AcesFlopsSpades

In the above question, it is given that : There is 15% decrease in income which leads to several…

Answered: Data collected from the economy of…

ECON MICRO

5th Edition

ISBN:9781337000536

Author:William A. McEachern

Publisher:William A. McEachern

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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I was wondering if you could help me understand how to answer the last question correctly. I've gotten it wrong on two other questions and I'm not sure why. Also, would it be possible for you to see if my work in the above section is correct, so that I can ensure that is not why the last question is wrong? Thanks!

Data collected from the economy of Pokerville reveals that a 15% decrease in income leads to the following changes:
• A 1% decrease in the quantity of flops demanded
• A 10% increase in the quantity of spades demanded
• A 36% 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
Flops
0.07
Normal
Spades
-0.67
Inferior
Aces
2.4 ▼
Normal
Which of the following three goods is most likely to be classified as a luxury good ?
Aces
Flops
Spades

Expert Solution

Step 1

In the above question, it is given that :

There is 15% decrease in income which leads to several changes.
1% decrease in quantity of flops demanded.
10% increase in quantity of spades demanded.
36% decrease in quantity of aces demanded.

To calculate income elasticity, the formula used is :

$I n c o m e e l a s t i c i t y = \frac{P e r c e n t a g e c h a n g e i n Q u a n t i t y d e m a n d e d}{P e r c e n t a g e c h n a g e i n I n c o m e}$

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