Suppose the income elasticity of demand is -0.5 for good X.This implies that a 5% decrease in income will cause the quantity demanded of good X to
A)increase by 2.5%,and X is an inferior good.
B)decrease by 2.5% and X is a normal good.
C)increase by 10% and X is an inferior good.
D)decrease by 10% and X is a normal good.

Question

Quizplus · Accepted Answer

The income elasticity of demand is negative, indicating that good X is an inferior good. A 5% decrease in income will cause the quantity demanded to increase by 2.5% (5% * -0.5 = -2.5%).

Suppose the Income Elasticity of Demand Is -0