Following an economic expansion, the average monthly disposable income of households in an urban area rises from £2,500 £2,500\,£2,500 to £2,700£2,700£2,700. Over the same period, the monthly quantity demanded of subscription-based meal prep kits increases from 1,600 1,600\,1,600 to 1,840 1,840\,1,840 units.
Assuming all other factors (including the price of the kits) remain constant, calculate the income elasticity of demand (YEDYEDYED) for these meal prep kits and determine their classification.
YED=+1.88YED = +1.88YED=+1.88; the meal kits are a luxury (normal) good.
YED=+0.53YED = +0.53YED=+0.53; the meal kits are a necessity (normal) good.
YED=−1.88YED = -1.88YED=−1.88; the meal kits are an inferior good.
YED=+1.20YED = +1.20YED=+1.20; the meal kits are a luxury (normal) good.
256 exam-style questions on AQA A Level Economics 1.3 Price determination in a competitive market, covering 1.3.1 The determinants of the demand for goods and services, 1.3.2 Price, income and cross elasticities of demand, 1.3.3 The determinants of the supply of goods and services, 1.3.4 Price elasticity of supply, 1.3.5 The determination of equilibrium market prices, and 1.3.6 The interrelationship between markets. Each one has a worked solution and a mark scheme showing where the marks go.