As Edwin's annual income increased from $40,000 to $50,000, his' purchases of tickets to see LA Kings hockey games increased from two to four per year. Calculated using the midpoint method, his income elasticity of demand for LA Kings hockey tickets is _____, and hockey tickets are a(n) _____ good.
A)-0.33; inferior
B)+0.67; normal
C)-3; inferior
D)+3; normal

Question

Quizplus · Accepted Answer

Using the midpoint formula, the income elasticity of demand can be calculated as:
% change in quantity demanded of hockey tickets / % change in income
The % change in quantity demanded is:
(4-2) / ((4+2)/2) * 100% = 33.33%
The % change in income is:
(50,000-40,000) / ((50,000+40,000)/2) * 100% = 25%
Therefore, the income elasticity of demand is:
33.33% / 25% = 1.33
Since the elasticity is greater than 1, we know that hockey tickets are a normal good. The correct answer is D.

As Edwin's Annual Income Increased from $40,000 to $50,000, His