If the income elasticity of demand for a good is 0.5, an economic recession will increase the demand for the good.

Question

Quizplus · Accepted Answer

If the income elasticity of demand for a good is 0.5, it means that the good is a normal good, but it is not a necessity. During an economic recession, consumers tend to have lower incomes, which decreases their purchasing power. As a result, they may cut back on spending in general or switch to cheaper alternatives. Therefore, a recession is more likely to decrease the demand for this good, rather than increase it.

If the Income Elasticity of Demand for a Good Is