Suppose you believe that plaid flannel shirts are an inferior good, and want to test this with economic data. You expect to find that the income elasticity for plaid flannel shirts is:
A)close to zero.
B)greater than zero, but less than one.
C)greater than one.
D)less than zero.

Question

Quizplus · Accepted Answer

The income elasticity of demand for a good is the percentage by which quantity demanded changes in response to a one percent change in income. For inferior goods, an increase in income leads to a decrease in consumption (and a decrease in income leads to an increase in consumption), implying that the income elasticity of demand is negative for inferior goods.

Suppose You Believe That Plaid Flannel Shirts Are an Inferior