For an inferior good ?
Correct answer: A. The price elasticity of demand is negative: the income elasticity of demand is negative
- A. The price elasticity of demand is negative: the income elasticity of demand is negative
- B. The price elasticity of demand is positive the income elasticity of demand is negative
- C. The price elasticity of demand is negative the income elasticity of demand is positive
- D. The price elasticity of demand is positive the income elasticity of demand is positive
Explanation
An inferior good has negative income elasticity because demand falls as income rises, while its price elasticity of demand is normally negative under the law of demand. Thus both elasticities are negative.
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Individual consumers, firms and markets are examined through demand and supply, elasticity, consumer choice, production, costs, revenue and the determination of prices and output. The topic also covers market structures such as perfect competition, monopoly and oligopoly, plus market failure, externalities and the distinction between microeconomic decisions and economy-wide outcomes.
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