Multiple Choice
Johnny Clutch just got a raise from \$950 per week to \$1,050 per week. As a result, he increases the number of concerts he attends by five percent. His demand for concerts is:
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4. Elasticity
Income Elasticity of Demand
Multiple Choice
Johnny Clutch just got a raise from \$900 per week to \$1100 per week. As a result, he decreases the amount of ramen noodles he buys from seven cartons a week to one carton a week. For Johnny, ramen noodles are:
A
Normal Goods, Necessity
B
Normal Goods, Luxury
C
Inferior Goods
D
Substitute Goods
Verified step by step guidance1
Identify the key economic concept: The problem is asking about the type of good ramen noodles are for Johnny, based on his change in consumption after a raise in income.
Understand the definition of inferior goods: Inferior goods are those for which demand decreases as income increases. This is because consumers tend to buy less of these goods when they can afford better alternatives.
Analyze Johnny's behavior: After receiving a raise, Johnny reduces his consumption of ramen noodles from seven cartons to one carton per week.
Relate Johnny's behavior to the concept: Since Johnny buys less ramen noodles as his income increases, this indicates that ramen noodles are an inferior good for him.
Conclude based on the analysis: Given the decrease in demand for ramen noodles with an increase in income, ramen noodles are classified as inferior goods for Johnny.
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