1. Define income elasticity of demand (2 marks).
2. Why does the sign of income elasticity matter to the classification of different goods or services?(2 marks).
3. If Ford, a US autos manufacturer, decides to sell its autos to China where disposable personal income growth rate is about 5% and the income elasticity of demand for autos is 4, how Ford will expect the growth rate of sales for its autos in China?(1 mark).