Why would a seller of a good care how responsive a consumer's demand for a good is to a change in the consumer's income?
A) The value of the income elasticity indicates whether the seller should raise a good's price to increase revenue.
B) The seller can use this information to calculate its tax incidence.
C) The value of the income elasticity indicates whether the seller should lower a good's price to increase revenue.
D) The sign of the income elasticity indicates whether consumers will buy more of it during an economic downturn.

Question

Quizplus · Accepted Answer

The sign of the income elasticity of demand indicates whether a good is a normal or inferior good. During an economic downturn, consumers will buy more of inferior goods (negative income elasticity) and less of normal goods (positive income elasticity).

Why Would a Seller of a Good Care How Responsive