Answer:
-2; Inferior good
Step-by-step explanation:
Given that,
Initial Quantity = 10 boxes
New Quantity = 8 boxes
Percentage increase in Sally's income = 10%
Change in consumption:
= 8 boxes - 10 boxes
= - 2 boxes
Percentage change in quantity demanded:
= (Change in quantity demanded ÷ Initial quantity) × 100
= (-2 ÷ 10) × 100
= - 20%
Therefore,
Income elasticity of demand:
= percentage change in quantity demanded ÷ Percentage change in income
= - 20% ÷ 10
= -2
Inferior goods are generally have a negative income elasticity of demand which means that an increase in the income of the consumer will lead to reduce the quantity demanded for inferior good and vice versa.
Hence, the good is a inferior type of good.
