If the income elasticity of demand for a commodity is -0.6, the commodity is classified as
Aa luxury good
Ba normal good
Can inferior goodCORRECT
Da Giffen good
AI
Toaster Teacher
Why the answer is C, and why the others tempt you.
Income elasticity of demand (YED) measures the responsiveness of quantity demanded to a change in consumer income. A negative YED indicates that as income rises, demand for the commodity falls, which is the defining characteristic of an inferior good. Normal goods have positive YED, while luxury goods have YED greater than 1.
Want this in Pidgin, Yoruba, Igbo or Hausa? Sign up free →
Practice more Economics questions
GCE Economics has thousands more questions like this — with Worked answers on every one.