ECONOMICS
ELASTICITY OF DEMAND
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Negative/less than 1
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Positive/greater than 1
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Negative/less than 0
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Positive/greater than 0
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Detailed explanation-1: -A normal good has an income elasticity of demand that is positive, but less than one.
Detailed explanation-2: -If the cross elasticity of demand of goods is greater than zero, the goods are said to be substitutes. With goods that have a cross elasticity of demand equal to zero, the two goods are independent of each other.
Detailed explanation-3: -When elasticity is less than zero, it means that the value is negative. Inferior goods are those goods whose income elasticity is less than zero. When income increases, then the demand for goods automatically got declines.
Detailed explanation-4: -A positive income elasticity of demand is associated with normal goods; an increase in income will lead to a rise in quantity demanded. If income elasticity of demand of a commodity is less than 1, it is a necessity good. If the elasticity of demand is greater than 1, it is a luxury good or a superior good.
Detailed explanation-5: -A normal good has an income elasticity of demand greater than 0. This implies that when the income of a consumer increases, the demand for that good increases too.