Question
thank you
Given the scenarios below, calculate the income elasticity of demand for that good using the midpoint method, determine whether the good is a normal good or an inferior good, and, if the good is a normal good, whether the good is income-elastic or income-inelastic. Specify answers to two decimal places. Sylvia works for Goldmann Sachs and has a salary of $106,000. After Christmas, she gets a raise to $109,500. As such, she decides to take an extra vacation each year, adding Spring Break to her list of 3 others: Christmas, Chinese New Years, and July 4th. Calculate for vacations. Blake eats two bags of potato chips a week. He is used to eating store brand chips since he only makes $10.00 an hour as a resident assistant. He obtains a summer internship as an economist for Bloomburg which pays $23.50 an hour and starts eating no store brand chips and only Lay's during the summer. Calculate for store brand chips. Becky really likes Macaroni Grill, but can only afford to eat out 4 times a year. Her boss only gives small raises, so this year she receives a 1% raise. She decides that a 1% raise is enough to warrant going out 1 more trip per year to Macaroni Grill. Calculate for restaurants. Lauren has to accept a pay cut to stay on as a fashion designer at Vogue from $81,000 a year to $73,000. Because of her pay cut, she buys 5% less t-shirts, skirts and jeans but still enough to refill her dresser. Calculate for clothing. Income Elasticity of Demand Normal or Inferior Good? Income Elastic, Inelastic, or N/A? Normal or Inferior Good? Income Elastic, Inelastic, or N/A? Normal or Inferior Good? Income Elastic, Inelastic, or N/A?
Explanation / Answer
1- elasticity=1 ,normal,income elastic
2- 0<elasticity <1, inferior,income elastic
3- elasticity<0, inferior,income inelastic
4- 0<elasticity<1, normal , elastic
