If the income elasticity of demand for good A was 3.9 and the income elasticity of demand for B was 0.2:
A)Both good A and good B are normal.
B)Both good A and good B are inferior.
C)Good A is normal and good B is inferior.
D)Good A is inferior and good B is normal.

Question

Quizplus · Accepted Answer

Income elasticity of demand greater than zero indicates a normal good. Since both goods have positive income elasticity (3.9 for A and 0.2 for B), both are normal goods.

If the Income Elasticity of Demand for Good a Was