10. Using the income elasticity of demand to characterize goods

A survey taken by residents from the imaginary town of Turnville tells economists that the following changes result from a 17% rise in income:

	A 38% increase in the quantity of clubs demanded
	A 5% decrease in the quantity of kings demanded
	A 5% increase in the quantity of cheques demanded

Compute the income elasticity of demand for each good and use the dropdown menus to complete the first column in the following table. Then, based on the income elasticities, classify each good as either a normal good or an inferior good. (Hint: Be careful to keep track of the direction of change. The sign of the income elasticity of demand can be positive or negative, and the sign gives important information.)

Good	Income Elasticity of Demand	Normal Good or Inferior Good
Clubs	-2.24 , -0.45 , 0.45 , 2.24	Normal or Inferior
Kings	-3.4 , -0.29 , 0.29, 3.4	Normal or Inferior
Cheques	-3.4 , -0.29 , 0.29, 3.4	Normal or Inferior

Which of the following three goods is most likely to be classified as a luxury good?

1. Kings
2. Cheques
3. Clubs