Question

Becky only eats out at Macaroni Grill, and she eats out three times per month. She receives a raise from $31,900 per year to $33,500 per year and decides to eat out five times per month. Use the midpoint method to calculate the monthly income elasticity of demand for eating out. Round your answer to two decimal places. units units This good is a normal good and income-inelastic. an inferior good. a normal good and income-elastic.

Answer 1

Answer:

This good is a normal good and income-inelastic

Explanation:

Elasticity of demand measures the degree of responsiveness of quantity demanded to changes in price.

Elasticity of demand = (new quantity demanded - old quantity demanded) / ( new quantity demanded - old quantity demanded) / 2) / (New income - Old income ) / (old income + new income)/2)

(5 - 3) / (3 + 5)/ 2) / ( 33500-31900) / (31900+33500)/2) = 6.45

The coefficient of elasticity is greater than one, therefore, demand is income elastic.

This means that a small change in income leads to a greater change in quantity demanded.

A normal good is a good whose demand increases when income increases and falls when income falls.

Eating out is a normal good because her demand increased when income increased.

I hope my answer helps you