Understanding Joseph's Income Elasticity of Demand for Fried Chicken Meals

What does Joseph's income elasticity of demand for fried chicken meals indicate?

Choose the correct option:

O 2.5 percent fewer fried chicken meals.

O 10 percent more fried chicken meals.

O 5 percent more fried chicken meals.

O 10 percent fewer fried chicken meals.

The negative income elasticity of demand (-2) indicates that fried chicken meals are an inferior good for Joseph. Therefore, if his income increases by 5%, he will buy 10% fewer fried chicken meals.

Understanding Joseph's Income Elasticity of Demand

Income elasticity of demand measures the responsiveness of the quantity demanded of a good to a change in income. A negative income elasticity of demand means that the good is an inferior good, which means that as income increases, the demand for the good decreases.

In Joseph's case, his income elasticity of demand for fried chicken meals is -2. This means that for every 1% increase in Joseph's income, the quantity of fried chicken meals he buys will decrease by 2%. If Joseph's income increases by 5%, we can calculate the change in the quantity of fried chicken meals he will buy by multiplying the income change (5%) by the income elasticity of demand (-2). So, the change in the quantity demanded will be -2% * 5% = -10%.

Therefore, if Joseph's income increases by 5%, he will buy 10% fewer fried chicken meals. So the correct answer is "10 percent fewer fried chicken meals."