You and your college roommate eat three packages of ramen noodles each week.After graduation last month,both of you were hired at several times your college income.You still enjoy ramen noodles very much and buy even more,but your roommate plans to buy other foods she prefers over ramen noodles.What are you and your roommate's income elasticities of demand for ramen noodles
A)Your income elasticity of demand is negative and your roommate's is positive.
B)Your income elasticity of demand is positive and your roommate's is negative.
C)Your income elasticity of demand is zero and your roommate's approaches infinity.
D)Your income elasticity of demand approaches infinity and your roommate's is zero.

Question

Quizplus · Accepted Answer

If both of you were hired at several times your college income, then it can be assumed that your incomes have increased significantly. If you still enjoy ramen noodles and buy even more, it implies that your income elasticity of demand for ramen noodles is positive. On the other hand, if your roommate plans to buy other foods she prefers over ramen noodles, it implies that her income elasticity of demand for ramen noodles is negative. Therefore, the best choice is B where your income elasticity of demand is positive and your roommate's is negative.

You and Your College Roommate Eat Three Packages of Ramen