Suppose that the income elasticity of demand for new clothes is positive. Other things being equal, which of the following statements is CORRECT?
A) New clothes are a normal good.
B) The quantity demanded of new clothes decreases as a consumer's income declines.
C) There exists a positive relationship between income and the demand for new clothes.
D) all of the above

Question

Quizplus · Accepted Answer

When the income elasticity of demand for a good is positive, it means that as income increases, the demand for that good also increases. This characteristic defines normal goods (A), implies that the quantity demanded decreases as income decreases (B), and indicates a positive relationship between income and demand for the good (C). Thus, all of the statements are correct.

Suppose That the Income Elasticity of Demand for New Clothes