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In the case of an inferior good, the income elasticity of demand is :
- a)positive.
- b)zero.
- c)negative.
- d)infinite.
Correct answer is option 'C'. Can you explain this answer?
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In the case of an inferior good, the income elasticity of demand is :a...
Explanation:
Inferior goods are those goods whose demand decreases with an increase in income level of the consumer. The income elasticity of demand is a measure of the responsiveness of the quantity demanded of a good to a change in income of the consumer. It is calculated as the percentage change in quantity demanded divided by the percentage change in income.
When it comes to inferior goods, the income elasticity of demand is negative. This is because as income increases, people tend to switch to higher quality goods. They may also prefer to purchase goods that were previously unaffordable. As a result, the demand for inferior goods decreases with an increase in income.
For example, consider the case of public transportation. When people have low incomes, they may rely on public transportation to get to work or school. However, as their income increases, they may be able to afford a car or other forms of transportation. As a result, the demand for public transportation decreases as income increases.
In conclusion, the income elasticity of demand for inferior goods is negative, indicating that the quantity demanded of the good decreases as income increases.
Inferior goods are those goods whose demand decreases with an increase in income level of the consumer. The income elasticity of demand is a measure of the responsiveness of the quantity demanded of a good to a change in income of the consumer. It is calculated as the percentage change in quantity demanded divided by the percentage change in income.
When it comes to inferior goods, the income elasticity of demand is negative. This is because as income increases, people tend to switch to higher quality goods. They may also prefer to purchase goods that were previously unaffordable. As a result, the demand for inferior goods decreases with an increase in income.
For example, consider the case of public transportation. When people have low incomes, they may rely on public transportation to get to work or school. However, as their income increases, they may be able to afford a car or other forms of transportation. As a result, the demand for public transportation decreases as income increases.
In conclusion, the income elasticity of demand for inferior goods is negative, indicating that the quantity demanded of the good decreases as income increases.
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In the case of an inferior good, the income elasticity of demand is :a)positive.b)zero.c)negative.d)infinite.Correct answer is option 'C'. Can you explain this answer?
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