The income elasticity of demand
A)is usually zero because "you can only have so much."
B)could be positive or negative or zero, depending on the nature of the good.
C)can never be zero.
D)must be positive because consumers tend to buy more at higher incomes.
E)must be negative because of the law of increasing cost.

Question

Quizplus · Accepted Answer

The income elasticity of demand can be positive for normal goods, negative for inferior goods, and zero for necessities. Therefore, it depends on the nature of the good. Choice A is incorrect as income elasticity of demand cannot always be zero. Choice D is incorrect as income elasticity of demand can be negative for inferior goods. Choice E is incorrect as the law of increasing cost is unrelated to income elasticity of demand.

The Income Elasticity of Demand