If a 10 percent increase in income results in a 10 percent decrease in the consumption of widgets, then
A)the price elasticity of demand for widgets equals 1.
B)the income elasticity of demand for widgets is negative.
C)the income elasticity of demand for widgets equals 1.
D)widgets are a normal good.
E)the price elasticity demand for widgets is negative.

Question

Quizplus · Accepted Answer

When a 10% increase in income results in a 10% decrease in the consumption of widgets, we can say that the income elasticity of demand for widgets is negative. This suggests that widgets are an inferior good, meaning that as consumers' income increases, they tend to shift their consumption towards other, more expensive goods.

If a 10 Percent Increase in Income Results in a 10