Answer:
D) the income elasticity is 1 so pizza is a normal good.
Explanation:
When the student's income is $10,000 per year, they eat 50 pizzas. If their income increases to $12,000, they eat 60 pizzas.
The income elasticity of demand using the midpoint method is calculated by using the following formula:
income elasticity = {change in quantity demanded / [(old quantity + new quantity) / 2]} / {change in income / [(old income + new income) / 2]}
= {10 / [(50 + 60) / 2]} / {2,000 / [(10,000 + 12,000) / 2]} = (10 / 55) / (2,000 / 11,000) = 0.182 / 0.182 = 1
