A survey taken by residents from the imaginary town of Draw City tells economists that the following changes result from a 13% fall in income:
• A 36% decrease in the quantity of queens demanded
• A 10% increase in the quantity of kings demanded
• A 5% decrease in the quantity of cheques demanded
Compute the income elasticity of demand for each good and use the dropdown menus to complete the first column in the following table. Then, based
on the income elasticities, classify each good as either a normal good or an inferior good. (Hint: Be careful to keep track of the direction of change.
The sign of the income elasticity of demand can be positive or negative, and the sign gives important information.)
Good Income Elasticity of Demand Normal Good or Inferior Good
Queens
Kings
Cheques
Which of the following three goods is most likely to be classified as a luxury good?
Kings
Cheques
Queens