Deb's income has just risen from $950 per week to $1,050 per week. As a result, she decides to increase the number of movies she attends each month by 5 percent. Her demand for movies is

Deb's income has just risen from $950 per week to $1,050 per week. As a result, she decides to increase the number of movies she attends each month by 5 percent. Her demand for movies is

• A. Income elastic.
• B. Represented by a vertical line.
• C. Represented by a horizontal line.
• D. Income inelastic.

Answer: (D)

The concept here is income elasticity of demand—the measure of how much quantity demanded responds to a change in income. Deb’s income rises about 10.5% (from 950 to 1050), while the number of movies she attends increases by 5%. The elasticity is roughly 5% / 10.5% ≈ 0.48, which is less than 1.0. That means the demand is income inelastic: quantity demanded rises with income, but by a smaller percentage than income changes. Since the quantity increases when income goes up, the good is normal, not inferior. The other options describe extreme responses to price changes (perfectly price-elastic or price-inelastic) rather than responses to income, so they don’t fit the situation.

The concept here is income elasticity of demand—the measure of how much quantity demanded responds to a change in income. Deb’s income rises about 10.5% (from 950 to 1050), while the number of movies she attends increases by 5%. The elasticity is roughly 5% / 10.5% ≈ 0.48, which is less than 1.0. That means the demand is income inelastic: quantity demanded rises with income, but by a smaller percentage than income changes. Since the quantity increases when income goes up, the good is normal, not inferior. The other options describe extreme responses to price changes (perfectly price-elastic or price-inelastic) rather than responses to income, so they don’t fit the situation.