ECONOMICS
ELASTICITY OF DEMAND
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Inferior, necessary good
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Inferior, luxury good
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Normal, necessary good
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Normal, luxury good
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Detailed explanation-1: -Normal goods have a positive income elasticity of demand; as incomes rise, more goods are demanded at each price level.
Detailed explanation-2: -Normal goods have a positive income elasticity of demand, where a change in demand and a change in income move in the same direction. Income elasticity of demand measures the magnitude with which the quantity demanded changes in reaction to a change in income.
Detailed explanation-3: -Income elasticity of demand is the change in the quantity demanded of a commodity with respect to the percentage change in the income. 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.