A research on household behavior in an urban area has shown that when the average income of
households is C$35,000 per year their average consumption of Margarine, Butter and Bread is
respectively 40, 5, 60 kg per year. The same research showed that if the average households
income increases by 15% to C$ 40,250 their average consumption of the three products will
change to 36, 7, and 62 kg per year.
a) Calculate the income elasticity of each product.
b) Specify which product is normal or inferior. (3 mark).
A research on household behavior in an urban area has shown that whe.pdf
1. A research on household behavior in an urban area has shown that when the average income of
households is C$35,000 per year their average consumption of Margarine, Butter and Bread is
respectively 40, 5, 60 kg per year. The same research showed that if the average households
income increases by 15% to C$ 40,250 their average consumption of the three products will
change to 36, 7, and 62 kg per year.
a) Calculate the income elasticity of each product.
b) Specify which product is normal or inferior. (3 mark)
