When Sven graduated from college and got a job, his income rose from $15,000 to $60,000. His

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When Sven graduated from college and got a job, his income rose from $15,000 to $60,000. His consumption habits also changed drastically. Use the following information to determine his arc income elasticity of demand and state whether the good is normal, inferior, or a luxury good. The arc income elasticity uses the midpoint of income and quantity.

a. Ramen noodles—consumption falls from 7 packs a week to zero.

b. Neckties—consumption rises from 1 per year to 11 per year.

c. Burrito at Sven’s favorite burrito place—consumption rises from 1 per week to 2 per week.

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Economics

ISBN: 287201

6th Global Edition

Authors: Daron Acemoglu, David Laibson, John A. List

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