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When Joe's income is $100 per week,he spends $20 per week on pizza.When his income rises to $110 per week,he spends $25 per week on pizza.If the price of pizza remained constant during this time,this information implies that,for Joe:
A) pizza is a normal good.
B) pizza is an inferior good.
C) pizza is a substitute good.
D) demand for pizza is price-elastic.
Income Elasticity
A measure of how much the demand for a good changes as the income of consumers changes.
Normal Good
A good for which demand increases as the income of consumers increases, showing a positive correlation between income and demand.
Pizza
A popular dish of Italian origin consisting of a round, flattened base of leavened wheat-based dough topped with tomatoes, cheese, and often various other ingredients.
- Acquire knowledge about the concept of income elasticity of demand and its use in differentiating normal from inferior goods.
- Implement insights on elasticity to project demand or consumption adjustments following changes in the price of related items or income variations.
- Assess the influence of income adjustments on the demand for commodities by applying the principle of income elasticity.
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Learning Objectives
- Acquire knowledge about the concept of income elasticity of demand and its use in differentiating normal from inferior goods.
- Implement insights on elasticity to project demand or consumption adjustments following changes in the price of related items or income variations.
- Assess the influence of income adjustments on the demand for commodities by applying the principle of income elasticity.
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