Suppose average real incomes go up by 10% in one year. During that year suppose that: purchases at dollar stores decline by 2%, purchases of dishwashing liquid soap increase by 2%, and purchases of new automobiles increase by 12%. Using the terminology of income elasticity of demand, discuss which of these is likely an inferior good, normal good, or even closer to a luxury good.

Suppose average real incomes go up by 10% in one year. During that year suppose that: purchases at dollar stores decline by 2%, purchases of dishwashing liquid soap increase by 2%, and purchases of new automobiles increase by 12%. Using the terminology of income elasticity of demand, discuss which of these is likely an inferior good, normal good, or even closer to a luxury good.

Survey Of Economics

10th Edition

ISBN:9781337111522

Author:Tucker, Irvin B.

Publisher:Tucker, Irvin B.

Chapter5: Price Elasticity Of Demand And Supply

Section: Chapter Questions

Problem 17SQ

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