A survey found that when incomes increased by 10 percent, the following changes

Question

A survey found that when incomes increased by 10 percent, the following changes in quantities demanded occurred: cruises up by 15 percent, spring water up by 5 percent, and sports drinks down by 2 percent Calculate the income elasticity of demand for cruises, spring water, and sports drinks. Answer to 1 decimal place. >>If your answer is negative, include a minus sign. If your answer is positive, do not include a plus sign. The income elasticity of demand for cruises is The income elasticity of demand for spring water is The income elasticity of demand for sports drinks is The demand for | is income elastic and the demand for is income inelastic. Choose the correct statement. OA. A membership in an athletic club is a normal good, spring water is a normal good, and a sports drink is an inferior good. O B. A membership in an athletic club is a normal good, spring water is an inferior good, and a sports drink is an inferior good O C. A membership in an athletic club is an inferior good, spring water is an inferior good, and a sports drink is an inferior good O D. A membership in an athletic club is a normal good, spring water is a normal good, and a sports drink is a normal good. OE. A membership in an athletic club is an inferior good, spring water is an inferior good, and a sports drink is a normal good

Explanation / Answer

Income elasticity=%change in quantity demand /%change in income

Cruises income elasticity=15/10=1.5

Spring water income elasticity=5/10=0.5

Sports drink income elasticity=-2/10=-0.2

Demand for cruises is elastic and demand for spring water is inelastic

Ans is A

Related Questions

Navigate

• Browse (All)
• Browse A
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.