When Mary earned $3,200 per month, she bought 2 concert tickets each month. Now her monthly income is $5,600, and the number of concert tickets she purchases has risen to 3 per month. Mary's income elasticity of demand for concert tickets equals ________ and the tickets are a(n) ________ good for Mary.

Question

Quizplus · Accepted Answer

To calculate the income elasticity of demand, we use the formula: 
Income elasticity of demand = percentage change in quantity demanded / percentage change in income 
First, we need to calculate the percentage change in quantity demanded: 
((3 tickets - 2 tickets) / 2 tickets) x 100% = +50% 
Mary's quantity demanded of concert tickets increased by 50% as her income increased. 
Next, we need to calculate the percentage change in income: 
(($5,600 - $3,200) / $3,200) x 100% = +75% 
Mary's income increased by 75% from $3,200 to $5,600. 
Now we can plug these numbers into the formula: 
Income elasticity of demand = +50% / +75% = +0.67 
Since the income elasticity of demand is positive (+0.67), we know that concert tickets are a normal good for Mary. Looking at the answer choices, the closest option is D, so that is the correct answer.

When Mary Earned $3,200 Per Month, She Bought 2 Concert