An economist determines that the income elasticity of demand for healthcare is 0.4. How should she interpret this finding?
A) Health care is a normal good and a necessity.
B) Health care is a normal good and a luxury.
C) Health care is an inferior good and a complement.
D) Health care is an inferior good.

Question

Quizplus · Accepted Answer

The income elasticity of demand for healthcare being 0.4 (a positive number less than 1) indicates that healthcare is a normal good (since the elasticity is positive) and a necessity (since the elasticity is less than 1).

An Economist Determines That the Income Elasticity of Demand for Healthcare