Normal goods have positive income elasticities of demand, and inferior goods have negative income elasticities of demand.

Question

Quizplus · Accepted Answer

This statement is true according to the law of demand. As income increases, people tend to buy more normal goods because they can afford them while demand for inferior goods decreases as people have more income and can afford to buy better quality goods. Therefore, normal goods have positive income elasticities, while inferior goods have negative income elasticities.

Normal Goods Have Positive Income Elasticities of Demand, and Inferior