Answer:
If Jack bought 21 DVDs last year when his income was $30,000 and he buys 23 DVDs this year when his income is $35,000, then his income elasticity of demand is 0.571 which means that DVDs are a(n) normal good for Jack.
Explanation:
Ei = ⌂Q/Q /⌂I/I
⌂Q = 23-21 = 2
⌂I = 35000-30000 =5000
I = 30000
Q=21
Ei=⌂Q/⌂I * I/Q = 2/5000 * 30000/21 = 2*6/21 =12/21 = 0.571
The income elasticity of demand is 0.571
Answer: 0.57; Normal good
Explanation:
Income elasticity of demand is an economic term that depicts the connection that exist between the income of a consumer and the consumer's demand of a product. When there is an increase or decrease in the income of a consumer, the consumer's income elasticity of demand will show if he will buy a product or not.
After the calculation which is shown in the attached file, the income elasticity of demand gotten is 0.57. This means that DVD is a normal good to Jack. For a normal good, the income elasticity of demand is positive but less than one.
