The type of elasticity of demand that is most commonly positively valued but that can be negative at timesis calledA) income elasticity of demand and it is negative when the good is a normal good.B) income elasticity of demand and it is negative when the good is an inferior good.C) price elasticity of demand and it is negative when the slope of the demand curve is negativelysloped.D) None of the above
Question
The type of elasticity of demand that is most commonly positively valued but that can be negative at timesis calledA) income elasticity of demand and it is negative when the good is a normal good.B) income elasticity of demand and it is negative when the good is an inferior good.C) price elasticity of demand and it is negative when the slope of the demand curve is negativelysloped.D) None of the above
Solution
The correct answer is B) income elasticity of demand and it is negative when the good is an inferior good.
Here's why:
Income elasticity of demand measures how the quantity demanded changes in response to a change in income. It is usually positive for normal goods (goods for which demand increases as income increases), meaning that as people's income increases, they buy more of these goods.
However, for inferior goods (goods for which demand decreases as income increases), income elasticity of demand is negative. This means that as people's income increases, they buy less of these goods. Instead, they start buying more expensive substitutes. This is why the income elasticity of demand can be negative at times.
Similar Questions
The price elasticity of demand is typically expressed as a positive number because: Group of answer choices 1.price and quantity move in the same direction. 2.the demand curve has a positive slope. 3.it's convenient to use absolute values. 4.both the numerator and the denominator are negative, so the formula yields a positive number.
A negative income elasticity of demand indicates that the productMultiple Choiceis an inferior good.is a normal good.is a complementary good.is a substitute good.
Which of the following statements about the income elasticity of demand is accurate?It measures the response of demand to changes in income.It is always positive.It is always negative.It is always zero
The price elasticity of a demand for a good:A.can vary from person to person.B.can be affected by the number of substitutes.C.can change over time.D.depends on the proportion of income the good requires in order to be purchased.E.All of the above
Explain the types of elasticity of demand.
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