Income elasticity of demand measures how the quantity demanded of a good responds to a change in consumers' income. It is calculated as the ratio of the percentage change in quantity demanded to the percentage change in income.

Goods and services can be categorized as either normal or inferior based on their income elasticity. Normal goods have a positive income elasticity of demand, meaning that as income increases, demand for these goods also increases. Inferior goods have a negative income elasticity of demand, meaning that as income increases, demand for these goods decreases.

Now, let's analyze the options:

A. Schoolbooks and supplies: These are necessary goods for students, so the demand is likely to be relatively inelastic to income changes.

B. A meal in a restaurant: This could be considered a luxury or non-essential good. As income increases, people may choose to eat out more often. Therefore, this good is likely to have a high income elasticity of demand.

C. Transportation to and from work or school: This is a necessary good for most people, so the demand is likely to be relatively inelastic to income changes.

D. Groceries: These are necessary goods, so the demand is likely to be relatively inelastic to income changes.

E. A new refrigerator: This could be considered a luxury or non-essential good. As income increases, people may choose to replace their old appliances more often. Therefore, this good is likely to have a high income elasticity of demand.

Comparing all these options, a meal in a restaurant (B) and a new refrigerator (E) are likely to be the most income elastic goods. However, between these two, a meal in a restaurant (B) could be considered more income elastic as it is a more frequent purchase and can be easily adjusted with changes in income. Therefore, the answer is B. A meal in a restaurant.

Question

Income elasticity of demand measures how the quantity demanded of a good responds to a change in consumers' income. It is calculated as the ratio of the percentage change in quantity demanded to the percentage change in income.

Goods and services can be categorized as either normal or inferior based on their income elasticity. Normal goods have a positive income elasticity of demand, meaning that as income increases, demand for these goods also increases. Inferior goods have a negative income elasticity of demand, meaning that as income increases, demand for these goods decreases.

Now, let's analyze the options:

A. Schoolbooks and supplies: These are necessary goods for students, so the demand is likely to be relatively inelastic to income changes.

B. A meal in a restaurant: This could be considered a luxury or non-essential good. As income increases, people may choose to eat out more often. Therefore, this good is likely to have a high income elasticity of demand.

C. Transportation to and from work or school: This is a necessary good for most people, so the demand is likely to be relatively inelastic to income changes.

D. Groceries: These are necessary goods, so the demand is likely to be relatively inelastic to income changes.

E. A new refrigerator: This could be considered a luxury or non-essential good. As income increases, people may choose to replace their old appliances more often. Therefore, this good is likely to have a high income elasticity of demand.

Comparing all these options, a meal in a restaurant (B) and a new refrigerator (E) are likely to be the most income elastic goods. However, between these two, a meal in a restaurant (B) could be considered more income elastic as it is a more frequent purchase and can be easily adjusted with changes in income. Therefore, the answer is B. A meal in a restaurant.

Knowee AI · Accepted Answer

Income elasticity of demand measures how the quantity demanded of a good responds to a change in consumers' income. It is calculated as the ratio of the percentage change in quantity demanded to the percentage change in income.

Goods and services can be categorized as either normal or inferior based on their income elasticity. Normal goods have a positive income elasticity of demand, meaning that as income increases, demand for these goods also increases. Inferior goods have a negative income elasticity of demand, meaning that as income increases, demand for these goods decreases.

Now, let's analyze the options:

A. Schoolbooks and supplies: These are necessary goods for students, so the demand is likely to be relatively inelastic to income changes.

B. A meal in a restaurant: This could be considered a luxury or non-essential good. As income increases, people may choose to eat out more often. Therefore, this good is likely to have a high income elasticity of demand.

C. Transportation to and from work or school: This is a necessary good for most people, so the demand is likely to be relatively inelastic to income changes.

D. Groceries: These are necessary goods, so the demand is likely to be relatively inelastic to income changes.

E. A new refrigerator: This could be considered a luxury or non-essential good. As income increases, people may choose to replace their old appliances more often. Therefore, this good is likely to have a high income elasticity of demand.

Comparing all these options, a meal in a restaurant (B) and a new refrigerator (E) are likely to be the most income elastic goods. However, between these two, a meal in a restaurant (B) could be considered more income elastic as it is a more frequent purchase and can be easily adjusted with changes in income. Therefore, the answer is B. A meal in a restaurant.

Which of the following goods is likely to be the most income elastic?A.Schoolbooks and suppliesB.A meal in a restaurantC.Transportation to and from work or schoolD.GroceriesE.A new refrigerator

Question

Solution

Similar Questions

Upgrade your grade with Knowee