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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?
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In case of an inferior good, the income elasticity of demand is:a)Posi...
Income Elasticity of Demand for Inferior Goods
Definition of Inferior Goods
Inferior goods are goods that people demand less of when their income rises. Generally, these goods are of lower quality and cheaper alternatives to other goods.
Income Elasticity of Demand
Income elasticity of demand (YED) measures the responsiveness of the demand for a good to a change in income. It is calculated as the percentage change in quantity demanded divided by the percentage change in income.
Income Elasticity of Demand for Inferior Goods
- When the income of consumers increases, they tend to switch to higher-quality goods. Therefore, the demand for inferior goods decreases as income increases.
- If the income elasticity of demand for a good is negative, it means that it is an inferior good. The negative sign indicates that as income rises, the quantity demanded of the good falls.
- The magnitude of the income elasticity of demand for an inferior good is typically between -1 and 0. This means that the percentage change in quantity demanded is smaller than the percentage change in income.
Conclusion
In conclusion, the income elasticity of demand for inferior goods is negative because as income increases, the demand for these goods decreases. The magnitude of the YED is typically between -1 and 0.
Definition of Inferior Goods
Inferior goods are goods that people demand less of when their income rises. Generally, these goods are of lower quality and cheaper alternatives to other goods.
Income Elasticity of Demand
Income elasticity of demand (YED) measures the responsiveness of the demand for a good to a change in income. It is calculated as the percentage change in quantity demanded divided by the percentage change in income.
Income Elasticity of Demand for Inferior Goods
- When the income of consumers increases, they tend to switch to higher-quality goods. Therefore, the demand for inferior goods decreases as income increases.
- If the income elasticity of demand for a good is negative, it means that it is an inferior good. The negative sign indicates that as income rises, the quantity demanded of the good falls.
- The magnitude of the income elasticity of demand for an inferior good is typically between -1 and 0. This means that the percentage change in quantity demanded is smaller than the percentage change in income.
Conclusion
In conclusion, the income elasticity of demand for inferior goods is negative because as income increases, the demand for these goods decreases. The magnitude of the YED is typically between -1 and 0.
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Community Answer
In case of an inferior good, the income elasticity of demand is:a)Posi...
In case of inferior goods increase in salary decreases the expenditure on inferior goods as in case of inferior crops, increase in salary results in increase consumption of superior crops but decreases the consumption of inferior crops. Hence the slope is negative
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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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