Aconsumer's weekly income is $300 and the consumer buys 5 bars of chocolate per week. when income increases to $330, the consumer buys 6 bars per week. what is the income elasticity of demand for chocolate by this consumer? based on this information, would you infer that chocolate is a normal or inferior good?

a. 1; inferior
b. 0.5; normal
c. 1; normal
d. 0.5; inferior
e. 2; normal
f. 2; inferior
g. none of the above

The correct answer is option E.

Explanation:

Income elasticity of demand measures the change in quantity demanded of a product because of a change in the income of the consumer. It is calculated as a ratio of change in quantity demanded and change in income.  

At the income level of $300, the consumers buy 5 bars of chocolate. When the income increases to $330, the consumer buys 6 bars of chocolate.  

The income elasticity of demand is  

=

=

=

=

= 2

Since the income elasticity of demand is positive, this implies that chocolate is a normal good.

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