Question

Charles purchases 20 basketball tickets per year when his annual income is $50,000 and 25 basketball tickets when his annual income is $60,000. Charles’s income elasticity of demand for basketball ticket is ________.a) 0.82, and basketball tickets are a normal good. b) 0.82, and basketball tickets are an inferior good c) 1.22, and basketball tickets are an inferior good d) 1.22, and basketball tickets are a normal good

Answer 1

d) 1.22, and basketball tickets are a normal good

Step-by-step explanation:

Income elasticity of demand measures the responsiveness of quantity demanded to changes in price of the good.

Elasticity of demand = percentage change in quantity demanded/ percentage change in income

Percentage change in income = (60,000 - 50,000) / 50,000 = 0.5

Percentage in quantity demanded = (25-20)/20=0.25

0.25/0.5 = 1.25

A normal good is a good whose demand increases when income increases and falls when income falls.

It varies directly with income.

An inferior good is a good whose demand increases when income when income falls and falls when income rises.

Because the demand for tickets increases with income, the tickets are a normal good.

I hope my answer helps you

Answer 2

d) 1.22, and basketball tickets are a normal good

Step-by-step explanation:

Given that

Q1 = 20

Q2 = 25

P1 = 50000

P2 = 60000

Income elasticity = (Q2 - Q1)/(Q2 + Q1) ÷ (P2 - P1)/(P2 + P1)

therefore,

IE = (25 - 20)/(25 + 20) ÷ (60000 - 50000)/(50000 + 60000)

= (5/45) ÷ (10000/110000)

= 0.11111 ÷ 0.09090

= 1.22.

Normal goods are those goods that demand increases with increases in income. Therefore, in this case basketball is a normal good as there was an increase in demand with increase in income. Also normal goods has positive income elasticity, given that 1.22 is positive, it also indicates that it is a normal good.