Data collected from the economy of Pokerville reveals that a 15% decrease in income leads to the following changes: • A 9% increase in the quantity of spades demanded • A 17% decrease in the quantity of chips demanded • A 29% decrease in the quantity of aces demanded Compute the income elasticity of demand for each good and use the dropdown menus to complete the first column in the following table. Then, based on its income elasticity, indicate whether each good is a normal good or an inferior good. (Hint: Be careful to keep track of the direction of change. The sign of the income elasticity of demand can be positive or negative, and the sign confers important information.) Good Income Elasticity of Demand Normal or Inferior Good Spades -1.67 / -1.6 / 0.6 / 1.67 Normal / Inferior Chips -1.13 / -0.88 / 0.88 / 1.13 Normal / Inferior Aces -1.93 / -0.52 / 0.52 / 1.93 Normal / Inferior Which of the following three goods is most likely to be classified as a luxury good ? Chips Spades Aces

Data collected from the economy of Pokerville reveals that a 15% decrease in income leads to the following changes: • A 9% increase in the quantity of spades demanded • A 17% decrease in the quantity of chips demanded • A 29% decrease in the quantity of aces demanded Compute the income elasticity of demand for each good and use the dropdown menus to complete the first column in the following table. Then, based on its income elasticity, indicate whether each good is a normal good or an inferior good. (Hint: Be careful to keep track of the direction of change. The sign of the income elasticity of demand can be positive or negative, and the sign confers important information.) Good Income Elasticity of Demand Normal or Inferior Good Spades -1.67 / -1.6 / 0.6 / 1.67 Normal / Inferior Chips -1.13 / -0.88 / 0.88 / 1.13 Normal / Inferior Aces -1.93 / -0.52 / 0.52 / 1.93 Normal / Inferior Which of the following three goods is most likely to be classified as a luxury good ? Chips Spades Aces

Economics:

10th Edition

ISBN:9781285859460

Author:BOYES, William

Publisher:BOYES, William

Chapter20: Elasticity: Demand And Supply

Section: Chapter Questions

Problem 13E: Using the following equation for the demand for a good or service, calculate the price elasticity of...

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Using the income elasticity of demand to characterize goods

Data collected from the economy of Pokerville reveals that a 15% decrease in income leads to the following changes:

•	A 9% increase in the quantity of spades demanded
•	A 17% decrease in the quantity of chips demanded
•	A 29% decrease in the quantity of aces demanded

Compute the income elasticity of demand for each good and use the dropdown menus to complete the first column in the following table. Then, based on its income elasticity, indicate whether each good is a normal good or an inferior good. (Hint: Be careful to keep track of the direction of change. The sign of the income elasticity of demand can be positive or negative, and the sign confers important information.)

Good	Income Elasticity of Demand	Normal or Inferior Good
Spades	-1.67 / -1.6 / 0.6 / 1.67	Normal / Inferior
Chips	-1.13 / -0.88 / 0.88 / 1.13	Normal / Inferior
Aces	-1.93 / -0.52 / 0.52 / 1.93	Normal / Inferior

Which of the following three goods is most likely to be classified as a luxury good ?

Chips

Spades

Aces

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