When Bob was employed, he would see a movie at the theater once a month. However, Bob got laid off six months ago, and since then he has only gone to the movie theater twice. This type of behavior can be measured using:
A) price elasticity of demand.
B) price elasticity of supply.
C) income elasticity of demand.
D) cross-price elasticity of demand.

Question

Quizplus · Accepted Answer

This type of behavior can be measured using income elasticity of demand. Bob's frequent movie theater visits when he was employed indicate that movies are a normal good for him. When he was laid off, his income decreased, causing him to reduce his expenditure on movies. The fact that he has only gone to the movie theater twice since becoming unemployed suggests that movies are somewhat income-elastic for Bob. Therefore, the best choice is C, income elasticity of demand.

When Bob Was Employed, He Would See a Movie at the Theater