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Genovia has experienced exceptional growth in recent years. Its GDP per capita has increased from around $30,000 to $50,000 in last 5 years. Over the period quantity demanded of personal cars has increased from 450,000 units per year to 600,000 units. Quantity demanded of public transport, however, has declined from 10,000 buses to 7,000 buses. Calculate income elasticity of demand and tell which product is a normal good and which one is inferior.

Genovia has experienced exceptional growth in recent years. Its GDP per capita has increased from around $30,000 to $50,000 in last 5 years. Over the period quantity demanded of personal cars has increased from 450,000 units per year to 600,000 units. Quantity demanded of public transport, however, has declined from 10,000 buses to 7,000 buses. Calculate income elasticity of demand and tell which product is a normal good and which one is inferior.

Principles of Economics 2e
Principles of Economics 2e
2nd Edition
ISBN:9781947172364
Author:Steven A. Greenlaw; David Shapiro
Publisher:Steven A. Greenlaw; David Shapiro
Chapter5: Elasticity
Section: Chapter Questions
Problem 8SCQ: The avenge annual income rises from 25,000 to 33,000, and the quantity of bleed consumed in a year...
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Genovia has experienced exceptional growth in recent years. Its GDP per capita has increased from around $30,000 to $50,000 in last 5 years. Over the period quantity demanded of personal cars has increased from 450,000 units per year to 600,000 units. Quantity demanded of public transport, however, has declined from 10,000 buses to 7,000 buses. Calculate income elasticity of demand and tell which product is a normal good and which one is inferior.
Transcribed Image Text:Genovia has experienced exceptional growth in recent years. Its GDP per capita has increased from around $30,000 to $50,000 in last 5 years. Over the period quantity demanded of personal cars has increased from 450,000 units per year to 600,000 units. Quantity demanded of public transport, however, has declined from 10,000 buses to 7,000 buses. Calculate income elasticity of demand and tell which product is a normal good and which one is inferior.
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