7. Using the income elasticity of demand to characterize goods A survey taken by residents from the imaginary town of Turnville tells economists that the following changes result from a 10% rise in income: • A 2% increase in the quantity of chips demanded • A 17% decrease in the quantity of hearts demanded • A 34% increase in the quantity of jokers 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 the income elasticities, classify each good as either a normal good or an inferior good. (Hint: Be careful to keep track of the direction of change.

7. Using the income elasticity of demand to characterize goods A survey taken by residents from the imaginary town of Turnville tells economists that the following changes result from a 10% rise in income: • A 2% increase in the quantity of chips demanded • A 17% decrease in the quantity of hearts demanded • A 34% increase in the quantity of jokers 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 the income elasticities, classify each good as either a normal good or an inferior good. (Hint: Be careful to keep track of the direction of change.

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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Income Effects depend on the income elasticity of demand for each good limit you buy. If one of the goods you buy has a negative income elasticity, that is, it is an inferior good, what must be true of the income elasticity of the other good you buy?
(Other Elasticity Measures) Complete each of the following sentences: a. The income elasticity of demand measures, for a given price, the __________ in quantity demanded divided by the __________ income from which it resulted. b. If a decrease in the price of one good causes a decrease in demand for another good, the two goods are __________. c. If the value of the cross-price elasticity of demand between two goods is approximately zero, they are considered __________.
Suppose that your demand schedule for DVDs is as follows: Price Quantity Demanded (income = 10,000) Quantity Demanded (income = 12,000) 8 40 DVDs 50 DVDs 10 32 45 12 24 30 14 16 20 16 8 12 a. Use the midpoint method to calculate your price elasticity of demand as the price of DVDs increases from 8 to 10 if (i) your income is 10,000 and (ii) your income is 12,000. b. Calculate your income elasticity of demand as your income increases from 10,000 to 12,000 if (i) the price is 12 and (ii) the price is 16.
What is the formula for the income elasticity of demand?
7. Using the income elasticity of demand to characterize goods A survey taken by residents from the imaginary town of Cardsburgh tells economists that the following changes result from a 10% fall in income: • An 8% decrease in the quantity of cheques demanded • A 15% increase in the quantity of hearts demanded • A 38% decrease in the quantity of queens demanded transcript 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 the income elasticities, classify each good as either 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 gives important information.) Income Elasticity of Demand Normal Good or Inferior Good Good Cheques Hearts Queens Itranscript Which of the following three goods is most likely to be classified as a luxury good ? OOO O Hearts O Cheques O…
7. Using the income elasticity of demand to characterize goods A survey taken by residents from the imaginary town of Draw City tells economists that the following changes result from an 11% fall in income: • A 13% increase in the quantity of kings demanded • A 14% decrease in the quantity of tokens demanded • A 30% decrease in the quantity of clubs 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 the income elasticities, classify each good as either 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 gives important information.) Good Kings Tokens Clubs Income Elasticity of Demand Normal Good or Inferior Good Which of the following three goods is most likely to be classified as a luxury good? Clubs Kings Tokens
7. Using the income elasticity of demand to characterize goods A survey taken by residents from the imaginary town of Draw City tells economists that the following changes result from a 10% rise in income: • A 2% increase in the quantity of tokens demanded • A 17% decrease in the quantity of kings demanded • A 34% increase in the quantity of jokers 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 the income elasticities, classify each good as either 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 gives important information.) Good Income Elasticity of Demand Normal Good or Inferior Good Tokens -0.2 Kings Jokers Which of the following three goods is most likely to be…
7. Using the income elasticity of demand to characterize goods A survey taken by residents from the imaginary town of Draw City tells economists that the following changes result from a 10% rise in income: • A 2% increase in the quantity of tokens demanded • A 17% decrease in the quantity of kings demanded • A 34% increase in the quantity of queens 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 the income elasticities, classify each good as either 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 gives important information.) Income Elasticity of Demand Normal Good or Inferior Good Good Tokens Kings Queens Which of the following three goods is most likely to be classified as a luxury good ? O Kings Tokens Queens
7. Using the income elasticity of demand to characterize goods Data collected from the economy of Royal City reveals that a 16% increase in income leads to the following changes: An 18% increase in the quantity of chips demanded A 14% decrease in the quantity of spades demanded A 30% increase 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) Income Elasticity of Demand Normal or Inferior Good Good Chips Spades Aces Which of the following three goods is most likely to be classified as a luxury good? Aces Spades Chips
7. Using the income elasticity of demand to characterize goods Data collected from the economy of Royal City reveals that an 18% decrease in income leads to the following changes: • A 6% decrease in the quantity of chips demanded • A 17% increase in the quantity of spades demanded • A 29% decrease in the quantity of diamonds 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 Chips Spades Diamonds Which of the following three goods is most likely to be classified as a luxury good ? O Diamonds O Spades O Chips O O O
7. Using the income elasticity of demand to characterize goods Data collected from the economy of Pokerville reveals that a 16% increase in income leads to the following changes: • A 6% increase in the quantity of flops demanded • A 14% decrease in the quantity of spades demanded • A 29% increase in the quantity of houses 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 Spades Houses
2. The following hypothetical table is John's demand for pandesal from Dec 2016 to January 2017 given his monthly income. Price per pc Quantity Income (P/mo) Dec 2016 2.00 100 5,000 Jan 2017 2.00 120 4,000 a. What happened to John's income after December? b. What happened to the quantity of pandesal bought by John? What economic concept is being shown by the relationship between John's income and his demand for pandesal? C.