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As the economy emerged from the most recent recession, household income rose by 6 percent. Over the same period, total expenditures on beef increased by 3 percent. Assuming that all other economic variables were held constant, A. the income elasticity of demand must be equal to 2. B. beef must be a normal good. C. beef must be an inferior good. D. Both A and B are correct.

Answer :

Answer:

The correct answer is option B.

Explanation:

An economy is recovering from the recession.  

It's household income rose by 6 percent.  

During the same period, the total expenditure on beef increased by 3 percent.  

This indicates that beef is a normal good.  

A normal good is a type of good which has positive income elasticity. In other words, its demand increases with an increase in income and vice versa.  

The income elasticity of demand for beef

= [tex]\frac{\Delta Q}{\Delta Y}[/tex]

= [tex]\frac{3}{6}[/tex]

= 0.5

The income elasticity of demand for beef is 0.5.

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