Congratulations! You have just landed your first job out of college as an economic analyst at the Bureau of Labor Statistics. Your starting salary is $55,000 per year; an increase of 250% per year over the salary you made at the local coffee shop. The corresponding table gives the percentage change in your purchases of each good after your income increases. Use this information to estimate your income elasticity of demand for each of the items.
Congratulations! You have just landed your first job out of college as an economic analyst at the Bureau of Labor Statistics. Your starting salary is $55,000 per year; an increase of 250% per year over the salary you made at the local coffee shop. The corresponding table gives the percentage change in your purchases of each good after your income increases. Use this information to estimate your income elasticity of demand for each of the items.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Congratulations! You have just landed your first job out of college as an economic analyst at the Bureau of Labor Statistics. Your starting salary is $55,000 per year; an increase of 250% per year over the salary you made at the local coffee shop. The corresponding table gives the percentage change in your purchases of each good after your income increases. Use this information to estimate your income elasticity of demand for each of the items.
Transcribed Image Text:Congratulations! You have just landed your first job out of college as an economic analyst at the Bureau of Labor
Statistics. Your starting salary is $55,000 per year; an increase of 250% per year over the salary you made at the local
coffee shop. The corresponding table gives the percentage change in your purchases of each good after your income
increases. Use this information to estimate your income elasticity of demand for each of the items.
Percentage change in quantity
Meals at restaurants
500
Cups of coffee
80
Instant noodles
-75
a. Income elasticity for meals at restaurants is
b. Income elasticity for cups of coffee is
c. Income elasticity for instant noodles is
d. Based on the calculations of income elasticity, meals at restaurants are
a normal good - , coffee is
, and ramen noodles are
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