5.When the Shaffers had a monthly income of $8,000, they would usually eat out eight times a month. Now that the couple makes $8,500 a month, they eat out 10 times a month.

a.Compute the couple's income elasticity of demand. Explain your answer. (Is a restaurant meal a normal or an inferior good to the couple?)

b.List and explain the determinants of the price elasticity of demand.

6.Suppose we are analyzing the market for wheat. For each of the events given below, state whether the demand curve and/or the supply curve would shift, provide reasons for the shift, and indicate the effect on the equilibrium price and equilibrium quantity.

a.The price of corn, a substitute for wheat, falls.

b.The number of wheat consumers increases.

c.A better method of harvesting wheat is introduced.

d.Consumer income falls due to a recession, and wheat is considered a normal good.

e.Farmers expect the price of wheat to increase next month.