The income elasticity of demand:
A) can only be zero or unity.
B) can only be positive.
C) can only be negative.
D) can be positive or negative.

Question

Quizplus · Accepted Answer

The income elasticity of demand can be positive or negative, indicating whether a good is a normal good (positive income elasticity) or an inferior good (negative income elasticity). A value of zero or unity would indicate that the quantity demanded does not change as a result of a change in income, which is rare in practice.

The Income Elasticity of Demand