Assume that a 4 percent decrease in income results in a 6 percent increase in the quantity demanded of a good.The income elasticity of demand for the good is
A)negative,and the good is an inferior good.
B)negative,and the good is a normal good.
C)positive,and the good is an inferior good.
D)positive,and the good is a normal good.

Question

Quizplus · Accepted Answer

The income elasticity of demand is calculated as the percentage change in quantity demanded divided by the percentage change in income. Here, it is -6% / -4% = 1.5, which is positive. However, since the quantity demanded increases as income decreases, the good is considered an inferior good.

Assume That a 4 Percent Decrease in Income Results in a 6