The demand schedule from question 3 above is reproduced below along with another demand schedule when consumer incomes have risen to $60,000 from $50,000. Use this information to answer the following questions. Use the midpoint method to calculate the percentage changes used to generate the elasticities.
a. What is the income elasticity of demand when motel rooms rent for $40?
b. What is the income elasticity of demand when motel rooms rent for $100?
c. Are motel rooms normal or inferior goods? Why?
d. Are motel rooms likely to be necessities or luxuries? Why?