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.
Question
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.
Solution
To determine what a negative income elasticity of demand indicates about a product, we need to understand the concept of income elasticity of demand. Income elasticity of demand measures how the quantity demanded of a good responds to changes in consumer income.
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Income Elasticity of Demand (Eᵢ): This is calculated as the percentage change in quantity demanded divided by the percentage change in income.
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Negative Income Elasticity: When the income elasticity of demand is negative, it means that as consumer income increases, the quantity demanded of the product decreases, and vice versa.
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Types of Goods:
- Inferior Good: A good for which demand decreases as consumer income rises (negative income elasticity).
- Normal Good: A good for which demand increases as consumer income rises (positive income elasticity).
- Complementary Good: A good that is often used together with another good (not directly related to income elasticity).
- Substitute Good: A good that can replace another good (not directly related to income elasticity).
Given this information, a negative income elasticity of demand indicates that the product is an inferior good. Therefore, the correct answer is:
- is an inferior good.
Similar Questions
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