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Answer :
Final answer:
The income elasticity of demand for hamburgers is calculated as B. -0.63, which indicates hamburgers are an inferior good for Arianna since she buys more when her income decreases. thus, the correct option is b.
Explanation:
The correct option for Arianna's income elasticity of demand for hamburgers, calculated using the midpoint method, is B. -0.63. To compute this, we need to use the formula:
Income Elasticity of Demand = (% Change in Quantity Demanded) / (% Change in Income)
The change in quantity is from 20 pounds to 35 pounds, and the change in income is from $50,000 to $20,000. To find the percentage changes using the midpoint formula, we calculate:
% Change in Quantity = ((35 - 20) / ((35 + 20)/2)) * 100 = (15 / 27.5) * 100 = 54.54%
% Change in Income = (($20,000 - $50,000) / (($20,000 + $50,000)/2)) * 100 = (-$30,000 / $35,000) * 100 = -85.71%
Thus, Income Elasticity of Demand = 54.54% / -85.71% = -0.636 or approximately -0.63, making it an inferior good since the elasticity is negative.
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