The income elasticity of demand is________.
A) always positive.
B) always negative.
C) positive for a normal good and negative for an inferior good.
D) negative for a normal good and positive for an inferior good.

Question

Quizplus · Accepted Answer

The income elasticity of demand is positive for normal goods because as consumers' income increases, they are willing to purchase more of the good. In contrast, the income elasticity of demand is negative for inferior goods because as consumers' income increases, they are likely to switch to higher quality substitutes, resulting in a decrease in demand for the inferior good. Therefore, option C is the correct choice.

The Income Elasticity of Demand Is________