If the income elasticity of demand for a good is 0.5,then
A)it is a normal good,and its demand curve will shift to the left if buyers' incomes increase
B)it is a normal good,and its demand curve will shift to the right if buyers' incomes increase
C)it is an inferior good,and its demand curve will shift to the right if buyers' incomes increase
D)it is an inferior good,and its demand curve will shift to the left if buyers' incomes increase
E)there is insufficient information to determine whether the good is normal or inferior

Question

Quizplus · Accepted Answer

If the income elasticity of demand for a good is positive but less than 1, then it is a normal good. If the income elasticity of demand is 0.5, it means that for a 1% increase in income, the demand for the good will increase by 0.5%. Therefore, the demand for the good will increase but at a slower rate than the increase in income. Hence, it is a normal good and its demand curve will shift to the right if buyers' incomes increase.

If the Income Elasticity of Demand for a Good Is