Question : If the income elasticity of demand for a good is negative, the good is considered to be:
Option 1: A normal good
Option 2: An inferior good
Option 3: A luxury good
Option 4: A necessity good
Correct Answer: An inferior good
Solution : The correct answer is (b) An inferior good When the income elasticity of demand for a good is negative, it indicates that as income increases, the quantity demanded for that good decreases. This is typically observed for goods that are considered lower-quality or less desirable compared to other alternatives as consumers' incomes rise. Such goods are referred to as inferior goods. Examples of inferior goods include generic store-brand products or low-cost substitutes for higher-quality goods.
Question : If the income elasticity of demand for a good is negative, 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.
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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