Question

Danita rescues dogs from her local animal shelter. when danita's income rises by 7 percent, her quantity demanded of dog biscuits increases by 12 percent. for danita, the income elasticity of demand for dog biscuits is:______. a. negative, and dog biscuits are an inferior good. b. negative, and dog biscuits are a normal good. c. positive, and dog biscuits are an inferior good. d. positive, and dog biscuits are a normal good.

Answer 1

Answer:

The income elasticity of demand for dog biscuits is Option D: positive, and dog biscuits are a normal good.

Explanation:

'Income elasticity of demand' refers to the reaction of the demand in quantity for a good or service to that of change in income.  

'Normal goods' are the goods that are related positively with income whereas 'inferior goods' are those goods which are related negatively with income. As the income increases, there is a rise in demand for the dog biscuits. This means the dog biscuits are normal goods. Income elasticity for demand is positive for Danita as it is because of the rise in income. Hence, Option D is the most appropriate.