Which of the following statements is correct? The
A) income elasticity of demand for inferior goods is positive.
B) cross elasticity of demand for substitutes is negative.
C) income elasticity of demand for normal goods is positive.
D) cross elasticity of demand for complements is positive.
E) income elasticity of demand for inferior goods is zero.

Question

Quizplus · Accepted Answer

Income elasticity of demand for normal goods is positive, reflecting the fact that as income increases, the quantity demanded of normal goods also increases. A is incorrect because inferior goods have a negative income elasticity of demand. B is incorrect because substitutes have a positive cross elasticity of demand, meaning that an increase in the price of one good leads to an increase in the quantity demanded of the other. D is incorrect because complements have a negative cross elasticity of demand, meaning an increase in the price of one good leads to a decrease in quantity demanded of the other. E is incorrect because inferior goods have a negative income elasticity of demand, not zero.

Which of the Following Statements Is Correct? the