Amy has recently received a 25% increase in salary and decided to order more from DoorDash, from the original 3 times a month to 10 times a month. Holding all else constant, calculate Amy's income elasticity and determine if DoorDash service is considered a normal good or an inferior good.

Question 16 options:

The income elasticity is 233.33, and DoorDash service is considered an inferior good.

The income elasticity is 9.33, and DoorDash service is considered a normal good.

The income elasticity is 9.33, and DoorDash service is considered an inferior good.

The income elasticity is 233.33, and DoorDash service is considered a normal good.

To solve this, we need to calculate **Amy's income elasticity of demand**, which measures the responsiveness of the quantity demanded of a good to a change in income. The formula for income elasticity of demand is:

\[
\text{Income Elasticity of Demand} = \frac{\%\ \text{Change in Quantity Demanded}}{\%\ \text{Change in Income}}
\]

### Step 1: Calculate the percentage change in quantity demanded
Amy's DoorDash usage increased from 3 times a month to 10 times a month. The formula for percentage change is:

\[
\%\ \text{Change in Quantity} = \frac{\text{New Quantity} - \text{Old Quantity}}{\text{Old Quantity}} \times 100
\]

Substituting the values:

\[
\%\ \text{Change in Quantity} = \frac{10 - 3}{3} \times 100 = \frac{7}{3} \times 100 \approx 233.33\%
\]

### Step 2: Calculate the percentage change in income
Amy's salary increased by 25%, so the percentage change in income is simply 25%.

### Step 3: Calculate the income elasticity of demand
Now, we can use the formula for income elasticity:

\[
\text{Income Elasticity} = \frac{233.33}{25} \approx 9.33
\]

### Step 4: Determine if DoorDash is a normal or inferior good
- A good is considered **normal** if the income elasticity is positive (greater than 0), meaning the demand increases with higher income.
- A good is considered **inferior** if the income elasticity is negative (less than 0), meaning demand decreases as income rises.

Since the income elasticity is positive (9.33), DoorDash is considered a **normal good**.

### Conclusion
The correct answer is:
**The income elasticity is 9.33, and DoorDash service is considered a normal good.**

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Do you want more details or have any questions?

Here are 5 related questions:
1. How would the result change if Amy's usage only increased to 5 times a month?
2. What does an income elasticity greater than 1 signify in terms of responsiveness?
3. Could DoorDash be considered a luxury or necessity good based on the elasticity?
4. How would Amy's decision change if DoorDash were an inferior good?
5. How is the concept of price elasticity different from income elasticity?

**Tip**: A positive income elasticity of demand typically indicates a normal good, and if the elasticity is greater than 1, the good is often classified as a luxury item.

Amy has recently received a 25% increase in salary and decided to order more from DoorDash, from the original 3 times a month to 10 times a month. Holding all else constant, calculate Amy's income elasticity and determine if DoorDash service is considered a normal good or an inferior good.

Learn how to calculate income elasticity of demand using Amy's DoorDash ordering behavior. This example covers a 25% increase in salary and a change in order frequency from 3 to 10 times a month. The step-by-step solution determines whether DoorDash is a normal or inferior good.

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