29 . Using the income elasticity of demand to characterize goods

Data collected from the imaginary economy of Ilium reveals that a 16% increase in income leads to the following changes:

	A 6% increase in the quantity of sogem demanded
	A 14% decrease in the quantity of farb demanded
	A 29% increase in the quantity of marpod demanded

Compute the income elasticity of demand for each of the goods described, and select the appropriate value in the following table. Then indicate whether the income elasticity for each good indicates that it is 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 important information is conferred by the sign.

Good	Income Elasticity of Demand	Normal or Inferior Good
Sogem
Farb
Marpod

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

Marpod

Farb

Sogem