ECONOMICS
ELASTICITY OF DEMAND
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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An increase in Azad’s income decreases her demand for cassette tapes. For her, cassette tapes are
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A complement to any good.
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A normal good.
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An inferior good.
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A substitute good.
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Explanation:
Detailed explanation-1: -Inferior goods have a negative income elasticity of demand; as consumers’ income rises, they buy fewer inferior goods. A typical example of such a type of product is margarine, which is much cheaper than butter.
Detailed explanation-2: -The demand for inferior goods rises when the real income of consumers falls and vice versa. Hence, income elasticity of demand for inferior goods is negative.
Detailed explanation-3: -When income rises, the demand quantity increases. But, when income decreases, their demand quantity increases. Inferior goods. Their elasticity is negative (IE <0).
Detailed explanation-4: -Inferior goods are goods whose demand drops as consumers’ incomes rise.
There is 1 question to complete.