151k views
1 vote
The income elasticity of demand for dental services is 2.40, and the income elasticity of demand for nursing homes is 0.90. Based on these estimates, dental services are a(n) _____ and nursing home care is a(n) _____.

User Al Imran
by
5.9k points

1 Answer

7 votes

Answer:

luxury good, normal good

Step-by-step explanation:

Income elasticity of demand, in economics, is the measure of the responsiveness of a quantity demanded as a service or goods to the change with income.

It is the relationship between the change in a quantity demanded and the change in the income.

For luxury goods and services, income elasticity of demand rises more than the rise in real income. It have an income elasticity of demand of greater that +1.

For normal goods, the quantity demanded increases when the income is increased. The income elasticity of demand is positive. The income elasticity for demand lies in the range of 0 and +1.

Hence, since the income elasticity for demand for dental services is 2.40, it is luxury goods and for nursing home care is 0.90, it is a normal good or service.

Therefore the answer is ---

luxury good, normal good

User Pooja
by
4.8k points