1. When Alex's income was $3,000, he bought 4 bagels and 12 donuts a month. Now his income is $5,000 and he buys 8 bagels and 6 donuts a month. Calculate Alex's income elasticity of demand forBagels andDonuts.

2.Wal-Mart's Recession-Time Pet Project:During the recession, Wal-Mart moved its pet food and supplies to the front with its other fast-growing business, baby products. Retail experts point out that kids and pets tend to be fairly recession-resistant businesseseven in a recession, dogs will be fed and kids will get their toys.

Source: CNN, May 13, 2008

a) What does this news clip imply about the income elasticity of demand for petfood and baby products?

b) Would the income elasticity of demand be greater or less than 1? Explain.