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 therefore the good is an inferior good.
B) negative and therefore the good is a normal good.
C) positive and therefore the good is an inferior good.
D) positive and therefore 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 negative, indicating that the good is an inferior good.

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