If the income elasticity of a good is negative, say -1.8, we can infer that the good is a(n)
A) luxury good, such as holiday travel
B) substitute good, such as Pepsi, with Coke available
C) complementary good, such as Pepsi, with a candy bar available
D) inferior good, such as a non-color televison
E) essential good, such as food

Question

Quizplus · Accepted Answer

A negative income elasticity of demand indicates that as income increases, the demand for the good decreases. This characteristic is typical of inferior goods, as people tend to buy less of them as their income rises, opting instead for higher-quality alternatives.

If the Income Elasticity of a Good Is Negative, Say