ZuoTi.Pro
Question

Suppose that household incomes in Rock Hill changed from $40,000 to $43,200, and assuming no change...

Suppose that household incomes in Rock Hill changed from $40,000 to $43,200, and assuming no change in price, the quantity of baloney sold changed from 160 to 150 cases per week. a. What is the value of the income elasticity of demand for baloney? b. Is baloney a normal good or an inferior good?

business   economics   
0 0
Add a comment Improve this question Transcribed image text
Next > < Previous
Sort answers by oldest

Homework Answers

Answer #1

Answer
Income elasticity of demand=(change in quantity/average quantity)/(change in income/average income)
Change in quantity=150-160=-10
average quantity=(150+160)/2=155
Change in income=43200-40000=3200
average income=(43200+40000)/2=41600
Income elasticity of demand=(-10/155)/(3200/41600)=-0.838709677
=-0.84

the income elasticity of demand for baloney is -0.84

======
b. Is baloney a normal good or an inferior good?
The good is inferior good as the income elasticity of demand is negative. it means an increase in income decreases the demand the good.

0 0
Add a comment
Know the answer?
Add Answer to:
Suppose that household incomes in Rock Hill changed from $40,000 to $43,200, and assuming no change...
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for? Ask your own homework help question. Our experts will answer your question WITHIN MINUTES for Free.
Similar Homework Help Questions

  • 2). Explain the difference between "change in supply" and "change in quantity supplied" Use graph to...

    2). Explain the difference between "change in supply" and "change in quantity supplied" Use graph to support your answer I 3a). Suppose that household income in Charlottetown increases from $44 000 to $45 000 and, assuming no change in price the quantity of Baker Baked Beans rises from 90 to 94cases per week. What is income elasticity of demand for the beans? Is the product a normal or inferior product? 3b). Explain why you would expect the demand for an...

  • Suppose consumer incomes rise by 10% in your country. Ceteris paribus, as a direct result, quantity...

    Suppose consumer incomes rise by 10% in your country. Ceteris paribus, as a direct result, quantity demanded of bikes falls by 4%. Income elasticity of demand must be and bicycles must be (a normal good / an inferior good) in your country. Select one: a. 4; a normal good b. 2.5 ; a normal good c. -2.5; an inferior good o d. -.4; an inferior good

  • 9.When price increase from $43 to $49, quantity supplied increases from 220 units to 240 units....

    9.When price increase from $43 to $49, quantity supplied increases from 220 units to 240 units. The price elasticity of supply in this price range is (use the Midpoint Formula): Multiple Choice a.0.3 b.0.67 c.1.5 d.3.33 10. When any change in price results in an infinite change in quantity demanded: Multiple Choice a.price elasticity of supply is zero. b.demand is perfectly elastic. c.demand is perfectly inelastic. d.price elasticity of supply is infinite. 12. Over a longer period of time: Multiple...

  • 11. If Leonard bought 20 comics last year when his income was $40,000 and he buys...

    11. If Leonard bought 20 comics last year when his income was $40,000 and he buys 24 comics this year when his income is $45,000, then his income elasticity of demand is which means that comics are a(n). good for Leonard. a. +0.33; normal b.-1.69; inferior c. +3.0; normal d. +0.59; inferior e. -0.33; inferior 12. Suppose Hamilton decides that if the price of their blenders is $32, the quantity demanded will be 1,000 units, and if the price is...

  • Assume that a 4 percent increase in income in the economy produces an 8 percent increase in the quantity demanded of good X

     6. Assume that a 4 percent increase in income in the economy produces an 8 percent increase in the quantity demanded of good X. The coefficient of income elasticity of demand is a. - 0.5 and therefore X is an inferior good. b. +2.0 and therefore X is an inferior good. c. +0.5 and therefore X is a normal good d. +2.0 and therefore X is a normal good 7. Suppose the price elasticity of demand for Reece's peanut butter cups is 1.5 and the...

  • Suppose initial price and quantity are

    Suppose initial price and quantity are 161 P and 281 Q and new price and quantity are 142 P and 422 Q . (i). Calculate price elasticity of demand. (ii). If price decreases further what will happen to total revenue? (iii). If we want to increase sales by 30 percent how much should price be decreased (in percentage)? (iv). If we decrease price by 10 percent how will it increase quantity demanded (in percentage)? (b). Suppose price of pizza is $10 and people buy 8...

  • Please help with these questions Question 36 0.4 pts When you change your quantity demanded of...

    Please help with these questions Question 36 0.4 pts When you change your quantity demanded of one good because of a change in price of another good, you are acting according to the principle of income elasticity of demand. O price elasticity of demand. O cross-price elasticity of demand O price elasticity of supply O income elasticity of supply Question 37 0.4 pts Assume that the market for baseballs is in equilibrium. There is a sudden decrease in income throughout...

  • 2. Suppose household annual demand for gasoline follows the equationQD = 2000 – 500P + 25I...

    2. Suppose household annual demand for gasoline follows the equationQD = 2000 – 500P + 25I where P is the price of a gallon of gasoline and I is household income in 1000s of dollars.Suppose that P = 3 and I = 60.What quantity of gasoline will households demand at this price and income level?__________What is the income elasticity of demand for gasoline at this price, income, and quantity level?__________What happens to the income elasticity of gasoline demand if I...

  • Suppose that you just got a raise at work and are trying to figure out how...

    Suppose that you just got a raise at work and are trying to figure out how you are going to spend the additional money. Given the table below, answer the following: % Change in Income % Change in Quantity Demanded of Good A -2% -3% 0% -2% 4% -1% 6% 0% 8% 4% 10% 6% a. Calculate the elasticity of income (EY) for Good A if your raise was 8% b. Is Good A an inferior or normal good. c....

  • Suppose that when household income in a city rises by 30%, and the price of good...

    Suppose that when household income in a city rises by 30%, and the price of good X remains unchanged, the quantity demanded of good X increases by 15%. Then, in this city, the income elasticity of demand for good X is , and you know that good X is

ADVERTISEMENT
Free Homework Help App
Download From Google Play
Scan Your Homework
to Get Instant Free Answers
Need Online Homework Help?
Ask a Question
Get Answers For Free
Most questions answered within 3 hours.
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT