Inferior goods have _________ and luxury goods have _________?
Correct answer: A. negative income elasticity income elasticity greater than 1
- A. negative income elasticity income elasticity greater than 1
- B. income elasticity greater than 1, negative income elasticities
- C. Positive income elasticities, negative income elasticities
- D. None of the above
Explanation
Inferior goods have negative income elasticity because demand falls as income rises, while luxury goods have income elasticity greater than one because demand rises more than proportionately with income. Thus option a correctly contrasts the two.
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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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