Question

Suppose that after hurricane​ Irene, the average income in Cape​ Charles, Virginia decreased by 2 percent. In response to this change in​ income, suppose the quantity of steak demanded in Cape Charles​ (holding the price of steak​ constant) decreased by 12 percent. What is the income elasticity of demand for steak in Cape​ Charles? The income elasticity of demand for steak in Cape Charles is _______. ​(Enter your response rounded to two decimal​ places.) In this​ instance, steak in Cape Charles is _______

Answer 1

Answer:The income elasticity of demand for steak in Cape Charles is ___6.0%____. In this​ instance, steak in Cape Charles is __A luxury good_____

Step-by-step explanation:

The formula for calculating income elasticity is given as

Percentage Change in demand divided by the Percentage change in income

.

Income Elasticity = 12%/-2%= 6%

Luxury goods have an income elasticity of demand greater +1 what we can conclude from this is that buying streak from Cape Charles is not an essential economic activity because a fall in income resulted to a proportionate decrease in quantity demanded.

In this instance, steak in Cape Charles is a Luxury good _____