Average income increase from Rs20,000 p.a to Rs 22,000 p.a Quantity demanded per year increases 5000 to 6000 units. Which of the following is correct ?
Correct answer: D. The product is normal
- A. Demand is price inelastic
- B. The good is inferior
- C. Income elasticity is -2
- D. The product is normal
Explanation
Income rises by 10% and quantity demanded rises by 20%, giving positive income elasticity of +2. A good whose demand increases with income is a normal good.
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