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10. Using the income elasticity of demand to characterize goods Data collected from the economy of Pokerville reveals that a 13% increase in income leads to the following changes: - A 21% increase in the quantity of diamonds demanded a A 16% decrease in the quantity of spades demanded - A 5% increase in the quantity of horses demanded Compute the income elasticity of demand for each good and use the dropdown menus to complete the rst column in the following table. Then, based on its income elasticity, indicate whether each good is a normal good or an inferior good. (Hint: Be careful to keep track of the direction of change. The sign of the income elasticity of demand can be positive or negative, and the sign confers important information.) Good Income Elasticity of Demand Normal or Inferior Good Diamonds 7 v Spades V 7 Horses '7 7 Which of the following three goods is most likely to be classied as a luxury good ? 0 Diamonds 0 Horses 0 Spades