Scenario 5-1 Suppose That When the Average College Student's Income Is $10,000

question 136

Multiple Choice

Scenario 5-1
Suppose that when the average college student's income is $10,000 per year,the annual quantity demanded of Patty's Pizza is 50 and the annual quantity demanded of Sue's Subs is 80.Suppose that when the price of Patty's Pizza increases from $8 to $10 per pie,the quantity demanded of Sue's Subs increases from 80 to 100.Suppose also that when the average student's income increases to $12,000 per year,the annual quantity demanded of Patty's Pizza increases from 50 to 60.
-Refer to Scenario 5-1.Using the midpoint method,what is the income elasticity of demand for pizza and what does the value indicate about the demand for pizza?

• A)The income elasticity is 0.18 so pizza is a normal good.
• B)The income elasticity is -1 so pizza is an inferior good.
• C)The income elasticity is 1 so pizza is unitary elastic.
• D)The income elasticity is 1 so pizza is a normal good.

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