Katherine’s annual salary increases from $82,750 to $102

QUESTION

1. Katherine’s annual salary increases from $82,750 to $102,750 and decides to increase the number of vacations she takes from 3 to 6. (1) Calculate her Income elasticity of demand, (2) determine if it’s a normal good or inferior good (3) Is it income elastic or inelastic? (Use the midpoint method)2. What is the difference between the Ricardian model of International Trade and Heckscher-Ohlin Model? Explain.

ANSWER:

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