Average income in the town of Growthville increased by 8% last year, and as a result, sales of pedicures increased by 12%. The income elasticity of demand is _____, and pedicures would be classified as a(n) _____ good.

Question

Quizplus · Accepted Answer

The income elasticity of demand is calculated as the percentage change in quantity demanded divided by the percentage change in income. Here, it is 12% / 8% = 1.5. A good is classified as normal if its demand increases with an increase in income, which is the case here.

Average Income in the Town of Growthville Increased by 8