Chris buys more new jewelry when her income rises.This means that for Chris,
A) new jewelry is an inferior good.
B) the income elasticity of demand for new jewelry is positive.
C) the income elasticity of demand for new jewelry is negative.
D) none of the above

Question

Quizplus · Accepted Answer

When Chris's income rises, she buys more new jewelry, which means that the income elasticity of demand for new jewelry is positive. This indicates that new jewelry is a normal good, meaning that as income rises, the demand for new jewelry increases. If new jewelry were an inferior good, Chris would buy less of it as her income rose. Option A is incorrect. Option C is also incorrect, as a negative income elasticity of demand would indicate an inferior good or a necessity, but Chris buying more new jewelry as her income rises implies that it's a normal good with a positive income elasticity of demand.

Chris Buys More New Jewelry When Her Income Rises