If the consumption of alcoholic beverages is higher for lower-income people than for higher-income people, then the income elasticity of demand for alcoholic beverages is positive.

Question

Quizplus · Accepted Answer

Income elasticity of demand measures how the quantity demanded of a good responds to a change in income. If a good is a normal good, an increase in income leads to an increase in demand, making the income elasticity positive. However, if lower-income people consume more than higher-income people, it suggests that the good might be an inferior good (where demand decreases as income increases), implying a negative income elasticity of demand, not positive.

If the Consumption of Alcoholic Beverages Is Higher for Lower-Income