Question : If the income elasticity of demand for a good is less than 0, it means the good is:
Option 1: A normal good.
Option 2: An inferior good.
Option 3: A luxury good.
Option 4: A substitute good.
Correct Answer: An inferior good.
Solution : The correct answer is (b) an inferior good.
Inferior goods are goods for which demand decreases as income increases. When the income elasticity of demand for a good is negative, it indicates that as people's income rises, they tend to consume less of that particular good and switch to higher-quality alternatives. Examples of inferior goods may include generic or store-brand products, lower-quality goods, or lower-priced alternatives.
Question : If the income elasticity of demand for a good is less than 1, it means the good is:
Question : If the income elasticity of demand for a good is greater than 1, it means the good is:
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