Last year,Jenna bought 50 kilograms of hamburger when her household's income was $60,000.This year,the household income was only $50,000 and Jenna bought 60 kilograms of hamburger.All else constant,what is Jenna's income elasticity of demand for hamburger,and what does this imply
A)positive, so Jenna considers hamburger to be an inferior good
B)positive, so Jenna considers hamburger to be a normal good and a necessity
C)negative, so Jenna considers hamburger to be an inferior good
D)negative, so Jenna considers hamburger to be a normal good

Question

Quizplus · Accepted Answer

To calculate the income elasticity of demand for hamburger, we use the formula:

% Change in Quantity Demanded / % Change in Income

We know that the % change in income is:

% Change in Income = (New Income - Old Income) / Old Income x 100

% Change in Income = ($50,000 - $60,000) / $60,000 x 100

% Change in Income = -16.67%

We also know that the % change in quantity demanded is:

% Change in Quantity Demanded = (New Quantity Demanded - Old Quantity Demanded) / Old Quantity Demanded x 100

% Change in Quantity Demanded = (60 - 50) / 50 x 100

% Change in Quantity Demanded = 20%

Therefore, the income elasticity of demand for hamburger is:

Income Elasticity of Demand = 20% / -16.67%

Income Elasticity of Demand = -1.2

Since the income elasticity of demand is negative, we can say that hamburger is an inferior good for Jenna. This means that as her income decreases, she is buying more hamburger.

Last Year,Jenna Bought 50 Kilograms of Hamburger When Her Household's