2. Expensive restaurant meals are income-elastic goods for most people, including Sanjay. Suppose his income falls by 10% this year. What can you predict about the change in Sanjay’s consumption of expensive restaurant meals?
Sanjay’s consumption of expensive restaurant meals will fall more than 10% because a given percent change in income (a fall of 10% here) induces a larger percent change in consumption of an income-elastic good.