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 In 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?
Verified Answer
In case of an inferior good, the income elasticity of demand is:a)Posi...
In the case of an inferior good, the income elasticity of demand is Negative. A negative income elasticity of demand is associated with inferior goods; an increase in income will lead to a fall in the demand and may lead to changes to more luxurious substitutes.
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In case of an inferior good, the income elasticity of demand is:a)Posi...
Income Elasticity of Demand for Inferior Good

Definition of Inferior Good
An inferior good is defined as a good whose demand decreases as income increases, and vice versa. These goods are generally considered to be of lower quality or less desirable than other goods, and so as a consumer's income increases, they tend to substitute inferior goods for higher-quality alternatives.

Income Elasticity of Demand
Income elasticity of demand measures the responsiveness of demand to changes in income. It is calculated by dividing the percentage change in quantity demanded by the percentage change in income.

Negative Income Elasticity for Inferior Goods
For inferior goods, the income elasticity of demand is negative, as the demand for these goods decreases as income increases. This is because as income increases, consumers tend to purchase higher-quality alternatives, which are generally more expensive than inferior goods.

Example of Inferior Good
An example of an inferior good is generic brand food products. As a consumer's income increases, they may switch to higher-quality, more expensive brand-name food products, leading to a decrease in demand for generic brands.

Conclusion
In summary, the income elasticity of demand for inferior goods is negative because as income increases, the demand for these goods decreases. This is due to consumers substituting higher-quality alternatives for inferior goods as their income increases.
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Community Answer
In case of an inferior good, the income elasticity of demand is:a)Posi...
answer is c as income increases consumer will prefer less of inferior goods and would prefer more of comfort and luxuries
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In case of an inferior good, the income elasticity of demand is:a)Positiveb)Zeroc)Negatived)InfiniteCorrect answer is option 'C'. Can you explain this answer?
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In case of an inferior good, the income elasticity of demand is:a)Positiveb)Zeroc)Negatived)InfiniteCorrect answer is option 'C'. Can you explain this answer? for CA Foundation 2024 is part of CA Foundation preparation. The Question and answers have been prepared according to the CA Foundation exam syllabus. Information about In case of an inferior good, the income elasticity of demand is:a)Positiveb)Zeroc)Negatived)InfiniteCorrect answer is option 'C'. Can you explain this answer? covers all topics & solutions for CA Foundation 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for In case of an inferior good, the income elasticity of demand is:a)Positiveb)Zeroc)Negatived)InfiniteCorrect answer is option 'C'. Can you explain this answer?.
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