The type of elasticity of demand that is most commonly positively valued but that can be negative at times is called:
A)income elasticity of demand and it is negative when the good is a normal good.
B)income elasticity of demand and it is negative when the good is an inferior good.
C)price elasticity of demand and it is negative when the slope of the demand curve is negatively sloped.
D)None of the above.

Question

Quizplus · Accepted Answer

Income elasticity of demand is typically positive because as income increases, people generally have more money to spend and therefore demand more goods and services. However, in the case of inferior goods, as income increases, people may switch to higher-quality substitutes and demand for the inferior good may actually decrease, resulting in a negative income elasticity of demand. The type of elasticity of demand that is most commonly positively valued is income elasticity of demand, which measures the responsiveness of quantity demanded to changes in income. This elasticity is usually positive because as income increases, people tend to buy more of most goods. However, it can be negative in the case of inferior goods, which are goods for which demand decreases as income increases.

The Type of Elasticity of Demand That Is Most Commonly