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Data collected in the imaginary economy of Illum reveals that a 16% increase in income leads to the following changes: A 18% increase in the quantity demanded of lafgar A 14% decrease in the quantity demanded of farb A 30% increase in the quantity demanded of randang The income elasticity of demand for lafgar is _? is this a normal or inferior good The income elasticity of demand for farb is _?_ is this a normal or inferior good The income elasticity of demand for randang is _?_ is this a normal or inferior good Which of the following three goods is most likely to be classified as a luxury good? a
Data collected in the imaginary economy of Illum reveals that a 16% increase in income leads to the following changes:
- A 18% increase in the quantity demanded of lafgar
- A 14% decrease in the quantity demanded of farb
- A 30% increase in the quantity demanded of randang
The income elasticity of demand for lafgar is _? is this a normal or inferior good
The income elasticity of demand for farb is _?_ is this a normal or inferior good
The income elasticity of demand for randang is _?_ is this a normal or inferior good
Which of the following three goods is most likely to be classified as a luxury good?
a. Randang
b. Lafgar
c. Farb
Expert Solution
a. The income elasticity of lafgar is 18/16 = 1.125, lafgar is a normal good.
b.. The income elasticity of farb is 14/16 = .875, farb is an inferior good
c. The income elasticity of randang is 30/16 = 1.875, randang is a normal good.
Lafgar is most likely to be considered a luxury good because it is a normal good and an increase in income increases the demand less than randang.
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