Question

Danita rescues dogs from her local animal shelter. When danita's income rises by 7 percent, her quantity demanded of dog biscuits increases by 12 percent. For danita, the income elasticity of demand for dog biscuits is
a. Negative, and dog biscuits are an inferior good.
b. Negative, and dog biscuits are a normal good.
c. Positive, and dog biscuits are an inferior good.
d. Positive, and dog biscuits are a normal good.

Answer 1

Answer: d. Positive, and dog biscuits are a normal good.

Explanation:

Normal goods are goods that are positively related with income and negatively related with prices. While, inferior goods are those goods which are negatively related with income. When demand for dog biscuits rises as a result of a rise in income, it shows that dog biscuits are a normal good for Danita. Therefore, we can say for Danita, the income elasticity of demand for dog biscuits is positive, and dog biscuits are a normal good.