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Generally, when income of consumer increases, he goes in for superior goods, leading to a fall in demand for inferior goods. It means, income elasticity of demand is ________.
  • a)
    Negative 
  • b)
    Unitary 
  • c)
    Zero 
  • d)
    Less than 1 
Correct answer is option 'A'. Can you explain this answer?
Most Upvoted Answer
Generally, when income of consumer increases, he goes in for superior ...
Explanation:
Income elasticity of demand is defined as the percentage change in quantity demanded of a good due to a percentage change in income of the consumer. It indicates how responsive the demand for a good is to a change in income of the consumer.

When the income of the consumer increases, he tends to move towards superior goods, i.e., he prefers to buy goods of higher quality or luxury goods. On the other hand, the demand for inferior goods decreases as the consumer can now afford better quality goods. Therefore, the income elasticity of demand for inferior goods is negative.

For example, when a person's income increases, he may stop buying low-quality food items and start buying organic or high-quality food items. Similarly, he may stop using low-quality clothes and start buying branded or high-quality clothes.

Hence, the correct answer is option 'A', i.e., negative.
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Generally, when income of consumer increases, he goes in for superior goods, leading to a fall in demand for inferior goods. It means, income elasticity of demand is ________.a)Negativeb)Unitaryc)Zerod)Less than 1Correct answer is option 'A'. Can you explain this answer?
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