Kuo S. Huang estimates that with every 15% increase income, the quantity of turkey purchased declines by 1.8%. From this information one would conclude that turkey is:
a luxury.
a necessity.
an inferior good.
a normal good.
Do a little research, then take a shot, what do you think?
Hint: inferior good
normal
To determine the classification of turkey in terms of economic goods, you can use the concepts of income elasticity of demand.
Income elasticity of demand measures the responsiveness of quantity demanded to a change in income.
In this scenario, Kuo S. Huang estimated that with every 15% increase in income, the quantity of turkey purchased declines by 1.8%.
To calculate the income elasticity of demand, we need to use the formula:
Income elasticity of demand = (% Change in Quantity Demanded) / (% Change in Income)
Given that the quantity of turkey purchased declines by 1.8% with a 15% increase in income, the income elasticity of demand can be calculated as follows:
Income elasticity of demand = (-1.8%)/(15%)
Simplifying this equation, we get:
Income elasticity of demand ≈ -0.12
Since the income elasticity of demand is negative (-0.12), we can conclude that turkey is an inferior good. An inferior good is a type of good for which the demand decreases when income increases. So, as people's income increases, they tend to buy less turkey.