Question

If average household income increases by 20%, from $50,000 to $60,000 per year, the quantity of rooms demanded at the Triple Sevens from rooms per night to rooms per night. Therefore, the income elasticity of demand is , meaning that hotel rooms at the Triple Sevens are

Answer 1

Answer:

Therefore, the income elasticity of demand is 0.83, meaning that hotel rooms at the Triple Sevens are normal goods and necessities.

Explanation:

Note: This question is not complete as some data in it are missing. The complete question is therefore provided before answering the question as follows:

If average household income increases by 20%, from $50,000 to $60,000 per year, the quantity of rooms demanded at the Triple Sevens rises from 300 rooms per night to 350 rooms per night. Therefore, the income elasticity of demand is __________, meaning that hotel rooms at the Triple Sevens are__________.

The explanation of the answer is now provided as follows:

Percentage change in income = 20%

Percentage change in quantity of rooms demanded = ((350 - 300) / 300) * 100 = 16.67%

Income elasticity of demand = Percentage change in quantity of rooms demanded / Percentage change in income = 16.67% / 20% = 0.83

Since the income elasticity of demand is positive but less than one, this implies that hotel rooms at the Triple Sevens are normal goods and necessities.

Therefore, the income elasticity of demand is 0.83, meaning that hotel rooms at the Triple Sevens are normal goods and necessities.