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Lauren's salary decreases from $44,000 to $30,000 . She decides to reduce the number of outfits she purchases each year from 20 to 19. Use the midpoint method to calculate the income elasticity of demand for new outfits.Round your answer to two decimal places.income elasticity:This good isa normal good.an inferior good.a luxury good.

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sebastiansierraocm

Answer:

Income Elasticy  =2

Explanation:

To calculate the income elasticity of demand by the midpoint method, we use the following formula:

Income Elasticy = Change in qd / (old qd - new qd / 2)

And this result is in turn divided by

Change in income / (old income - new income / 2)

Therefore, we obtain:

= 1 / ( 20 - 19 / 2)

= 1 / 0.5

= 2

And

= 14,000 / ( 44,000 - 30,000 / 2 )

= 2

The final result is

Income Elasticity = 2 / 2

                            = 1

The outfits are a normal good, because as the quantity of income decreases, the quantity demanded for it decreases too.

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