Question

Hint Check And estion 5 of 8 > Sylvia's annual salary increases from $100,000 to $109,500. Sylvia decides to increase the number of vacations she takes per year from three to four. Use the midpoint method to calculate her income elasticity of demand for vacations. Round your answer to two decimal places. This good is units O a normal good and income inelastic. O a normal good and income-elastic. O an inferior good.

Answer 1

Answer
Income elasticity of demand=(change in quantity/average quantity)/(change in income/average income)
Change in quantity=4-3=1
average quantity=(4+3)/2=3.5
Change in income=109500-100000=9500
average income=(109500+100000)/2=
Income elasticity of demand=(1/3.5)/(9500/104750)
=3.15037594
=3.15
the income elasticity of demand is 3.15 which is positive so the good is a normal good and it is above 1 so it is income elastic.

Option 2
a normal good and income elastic.