A good with an income elasticity of 0.4 is:
A) a luxury.
B) normal.
C) inferior.
D) a substitute.

Question

Quizplus · Accepted Answer

A good with an income elasticity of 0.4 is a normal good as its demand increases less than proportionally to an increase in income. A luxury good would have an income elasticity greater than 1, an inferior good would have a negative income elasticity, and a substitute good would have a cross-price elasticity of demand greater than 0.

A Good with an Income Elasticity of 0