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As income increases, the consumer will go in for superior goods and consequently the demand for inferior goods will fall. This means:
- a)income elasticity of demand less than one
- b)negative income elasticity of demand
- c)zero income elasticity of demand
- d)unitary income elasticity of demand
Correct answer is option 'B'. Can you explain this answer?
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As income increases, the consumer will go in for superior goods and co...
In case of inferior goods, there will be negative income elasticity. (Ey< 0)
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As income increases, the consumer will go in for superior goods and co...
Income Elasticity of Demand and Superior/Inferior Goods
Income elasticity of demand is the measure of how responsive the demand for a particular good is to changes in income. It is calculated as the percentage change in quantity demanded divided by the percentage change in income.
Superior goods are those goods that consumers tend to buy more of as their income increases, while inferior goods are those goods that consumers tend to buy less of as their income increases.
Effect of Income Increase on Demand for Inferior Goods
As income increases, consumers tend to shift their consumption patterns towards superior goods and away from inferior goods. This means that the demand for inferior goods will fall as income increases.
Explanation of Answer Options
a) Income elasticity of demand less than one: This option is partially correct, as income elasticity of demand for inferior goods is indeed less than one. However, it does not fully answer the question as it does not explain the relationship between income and demand for inferior goods.
b) Negative income elasticity of demand: This option is also partially correct, as the income elasticity of demand for inferior goods is negative. However, it does not fully answer the question as it does not explain the relationship between income and demand for inferior goods.
c) Zero income elasticity of demand: This option is incorrect, as the income elasticity of demand for inferior goods is not zero.
d) Unitary income elasticity of demand: This option is incorrect, as the income elasticity of demand for inferior goods is generally less than one, and therefore not unitary.
Conclusion
The correct answer is a) income elasticity of demand less than one, as this best explains the relationship between income and demand for inferior goods. As income increases, consumers tend to shift their consumption patterns towards superior goods and away from inferior goods, resulting in a decrease in demand for inferior goods.
Income elasticity of demand is the measure of how responsive the demand for a particular good is to changes in income. It is calculated as the percentage change in quantity demanded divided by the percentage change in income.
Superior goods are those goods that consumers tend to buy more of as their income increases, while inferior goods are those goods that consumers tend to buy less of as their income increases.
Effect of Income Increase on Demand for Inferior Goods
As income increases, consumers tend to shift their consumption patterns towards superior goods and away from inferior goods. This means that the demand for inferior goods will fall as income increases.
Explanation of Answer Options
a) Income elasticity of demand less than one: This option is partially correct, as income elasticity of demand for inferior goods is indeed less than one. However, it does not fully answer the question as it does not explain the relationship between income and demand for inferior goods.
b) Negative income elasticity of demand: This option is also partially correct, as the income elasticity of demand for inferior goods is negative. However, it does not fully answer the question as it does not explain the relationship between income and demand for inferior goods.
c) Zero income elasticity of demand: This option is incorrect, as the income elasticity of demand for inferior goods is not zero.
d) Unitary income elasticity of demand: This option is incorrect, as the income elasticity of demand for inferior goods is generally less than one, and therefore not unitary.
Conclusion
The correct answer is a) income elasticity of demand less than one, as this best explains the relationship between income and demand for inferior goods. As income increases, consumers tend to shift their consumption patterns towards superior goods and away from inferior goods, resulting in a decrease in demand for inferior goods.
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As income increases, the consumer will go in for superior goods and consequently the demand for inferior goods will fall. This means:a)income elasticity of demand less than oneb)negative income elasticity of demandc)zero income elasticity of demandd)unitary income elasticity of demandCorrect answer is option 'B'. Can you explain this answer?
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