1. Define the income elasticity of demand. Use income elasticity to distinguish a normal good from an inferior good. Is it possible to tell from the income elasticity of demand whether a product is a luxury good or a necessity good? Income elasticity of demand is

a. the percentage change in quantity demanded of one good divided by the percentage change in the price of another good.

b. the percentage change in quantity supplied divided by the percentage change in price.

c. the percentage change in quantity demanded divided by the percentage change in price.

d. the percentage change in income divided by the percentage change in prices.

e. the percentage change in quantity demanded divided by the percentage change in income.

2. Consider the market for airplanes. The supply of airplanes over a short period of time (such as a month) is likely to be relatively

a. elastic

b. inelastic