When Frank's Income Rises from $29,000 to $34,000 Per Year

question 11

Essay

When Frank's income rises from $29,000 to $34,000 per year, he increases his purchases of tomatoes from 20 pounds to 28 pounds per year. What is Frank's income elasticity of demand for tomatoes? (Use the midpoint formula.) According to Frank, are tomatoes an inferior or normal good?

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Definitions:

Import Quota

A limit set by a government on the quantity of a specific good that can be imported into the country.

Interest Rate

The amount charged by lenders to borrowers for the use of money, expressed as a percentage of the principal per period of time.

Open-Economy Macroeconomic Model

A model that analyzes an economy that interacts freely with other economies around the world, focusing on trade and financial flows.

Government Budget Deficit

Represents the financial situation in which a government's expenditures exceed its revenues within a specific period, leading to borrowing or debt accumulation.