Genovia has experienced exceptional growth in recent years. Its GDP per capita (or Income) has increased from around $30,000 to $50,000 in last 5 years. Over the period quantity demanded of personal cars has increased from 450,000 units per year to 600,000 units. Quantity demanded of public transport, however, has declined from 10,000 buses to 7,000 buses. Calculate income elasticity of demand and tell which product is a normal good and which one is inferior.
Genovia has experienced exceptional growth in recent years. Its GDP per capita (or Income) has increased from around $30,000 to $50,000 in last 5 years. Over the period quantity demanded of personal cars has increased from 450,000 units per year to 600,000 units. Quantity demanded of public transport, however, has declined from 10,000 buses to 7,000 buses. Calculate income elasticity of demand and tell which product is a normal good and which one is inferior.
Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)
14th Edition
ISBN:9781305506381
Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Chapter3: Demand Analysis
Section: Chapter Questions
Problem 6E
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Genovia has experienced exceptional growth in recent years. Its
Income) has increased from around $30,000 to $50,000 in last 5 years. Over the
period quantity demanded of personal cars has increased from 450,000 units per year
to 600,000 units. Quantity demanded of public transport, however, has declined from
10,000 buses to 7,000 buses. Calculate income elasticity of
product is a normal good and which one is inferior.
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