When her income increased from $10,000 to $20,000, Heather's consumption of macaroni decreased from 10 pounds to 5 pounds and her consumption of soy-burgers increased from 2 pounds to 4 pounds. Using the midpoint method, we can conclude that for Heather, macaroni
A)and soy-burgers are both normal goods with income elasticities equal to 1.
B)is an inferior good and soy-burgers are normal goods; both have income elasticities of 1.
C)is an inferior good with an income elasticity of -1 and soy-burgers are normal goods with an income elasticity of 1.
D)and soy-burgers are both inferior goods with income elasticities equal to -1.

Question

Quizplus · Accepted Answer

Macaroni is an inferior good because its consumption decreases as income increases, indicating a negative income elasticity. Soy-burgers are a normal good because their consumption increases with income, indicating a positive income elasticity. Using the midpoint method to calculate income elasticity of demand gives -1 for macaroni and 1 for soy-burgers.

When Her Income Increased from $10,000 to $20,000, Heather's Consumption