When consumers' incomes decline during a recession, they increase their consumption of instant coffee and reduce their consumption of other beverages. Therefore, instant coffee:
A) is a necessity.
B) has a negative income elasticity of demand.
C) has an income elasticity of demand greater than zero but less than one.
D) is a normal good.

Question

Quizplus · Accepted Answer

According to the statement, as consumers' incomes decline during a recession, their consumption of instant coffee increases. This implies that instant coffee has a negative income elasticity of demand, as its consumption decreases when income increases. Therefore, option B is the correct answer.

When Consumers' Incomes Decline During a Recession, They Increase Their