Suppose that the income elasticity of demand for frozen dinners is negative. Other things being equal, which of the following statements is INCORRECT?
A) Frozen dinners are an inferior good.
B) The quantity demanded of frozen dinners increases as a consumer's income declines.
C) There exists a negative relationship between income and the demand for frozen dinners.
D) The share of income spent on good X must decrease as a consumer's income decreases.

Question

Quizplus · Accepted Answer

The statement is incorrect because as the income of a consumer declines, the share of income spent on frozen dinners may actually increase since the demand for frozen dinners increases.

Suppose That the Income Elasticity of Demand for Frozen Dinners