Question : If the income elasticity of demand for a good is positive, 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: A normal good.
Solution : The correct answer is (a) A normal good.
A normal good is a type of good for which the demand increases as consumer income increases. When the income elasticity of demand is positive, it indicates that the percentage change in quantity demanded is greater than the percentage change in income. In other words, as consumers' income rises, they tend to purchase more of the good, reflecting a positive relationship between income and demand.
Examples of normal goods include everyday necessities like food, clothing, and housing. As consumers' income increases, they have more purchasing power and are able to afford and consume more of these goods.
Question : If the income elasticity of demand for a good is greater than 1, it means the good is:
Question : If the income elasticity of demand for a good is less than 1, it means the good is:
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