A good is considered normal when its income elasticity of demand is ___ and inferior when the its income elasticity of demand is ___.
A)Greater than zero, less than zero.
B)Less than zero, greater than zero.
C)Greater than one, less than one.
D)Less than one, greater than one.

Question

A good is considered normal when its income elasticity of demand is ___ and inferior when the its income elasticity of demand is ___.
A)​Greater than zero, less than zero.
B)​Less than zero, greater than zero.
C)​Greater than one, less than one.
D)​Less than one, greater than one.

Quizplus · Accepted Answer

A good is considered normal when its income elasticity of demand is greater than zero, which means that as income increases, the quantity demanded increases as well. Conversely, a good is considered inferior when its income elasticity of demand is less than zero, meaning that as income increases, the quantity demanded decreases. Option C and D refer to the magnitude of income elasticity, not the type of good.

A Good Is Considered Normal When Its Income Elasticity of Demand