If the quantity demanded of peanut butter falls by 12% when income rises by 10%, then peanut butter is
A) an inferior good.
B) a normal good.
C) income-elastic demand.
D) both A and C

Question

Quizplus · Accepted Answer

When the quantity demanded of a good falls as income rises, it is considered an inferior good. Additionally, since the magnitude of the change in quantity demanded is larger than the change in income (12% vs. 10%), the income elasticity of demand is greater than one, indicating income-elastic demand. Therefore, option D is also correct, but A is the best choice.

If the Quantity Demanded of Peanut Butter Falls by 12