If good Z has an income elasticity of 1.0, then demand for good Z is income __________ and the good is __________.
A)inelastic, normal
B)inelastic, inferior
C)elastic, normal
D)elastic, inferior
E)unit elastic, normal

Question

Quizplus · Accepted Answer

An income elasticity of 1.0 means that the demand for good Z changes proportionally with income, which is defined as unit elastic. Since the elasticity is positive, good Z is considered a normal good, as demand increases with an increase in income.

If Good Z Has an Income Elasticity of 1