If the income elasticity of demand for a good is negative it must be ?
Correct answer: B. an inferior good
- A. an elastic good
- B. an inferior good
- C. a normal good
- D. a luxury good
Explanation
A negative income elasticity means demand falls as income rises, which is the definition of an inferior good. Normal goods have positive income elasticity, while luxury goods have elasticity greater than one.
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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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