7. Using the income elasticity of demand to characterize goods Data collected in

Question

7. Using the income elasticity of demand to characterize goods Data collected in the imaginary economy of Ilium reveals that a 15% increase in income leads to the following changes: * A 40% increase in the quantity demanded of randang * A 10% decrease in the quantity demanded of kang * A 12% increase in the quantity demanded of lafgar The income elasticity of demand for lafgar is the cross-price elasticity of demand, the sign of the income elasticity of demand can be positive or negative, and important information is conferred by the sign) . (Be careful to keep track of the direction of change. Like According to the income elasticity of demand, randang is good and kang is good Which of the following three goods is most likely to be classified as a luxury good? O Kang Lafgar O Randang

Explanation / Answer

1-Less than 1.

2-Normal, Inferior

3-Rangdang(Increase in demand is more than the increase in income).

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