4. The demand schedule from question 3 above is reproduced below along with another demand schedule when consumer incomes have risen to $60,000 from $50,000. Use this information to answer the following questions. Use the midpoint method to calculate the percentage changes used to generate the elasticities. Quantity Demanded When Quantity Demanded When Income is $60,000 Price Income is $50,000 $ 20 24 40 20 60 16 80 12 100 8 120 4 34 30 26 22 18 14

a. What is the income elasticity of demand when motel rooms rent for $40?

b. What is the income elasticity of demand when motel rooms rent for $100? C. Are motel rooms normal or inferior goods? Why?

d. Are motel rooms likely to be necessities or luxuries? Why?