Use the above table. Based on the information in the table, artisan bread is a(n)
-Use the above table. The income elasticity of jam is
A) -0.33.
B) 0.33.
C) 3.00.
D) -3.00.

Question

Quizplus · Accepted Answer

Based on the high income elasticity of demand for artisan bread, it can be considered a luxury good, which means that as income increases, demand for artisan bread also increases.

Answer: D) -3.00.
 The income elasticity of jam is calculated as percentage change in quantity demanded of jam divided by percentage change in income. Using the information in the table, we can see that when income increases from $50,000 to $65,000, quantity demanded of jam decreases from 200 to 140. This represents a percentage change in quantity demanded of -30%. Similarly, the percentage change in income is 30%. Therefore, the income elasticity of jam is calculated as (-30% / 30%) = -1. This means that jam is an inferior good, where as income increases, demand for the good decreases.

Therefore, the best choice would be:

Answer: A,D
 Artisan bread is a luxury good, and jam is an inferior good with a negative income elasticity of demand.

Use the Above Table