Scenario 5.1
The demand for noodles is given by the following equation: Q = 20 - 4P + 0.2I - 2P x . Assume that P = $8, I = 200, and P x = $10.
-When the income elasticity of demand for a good is negative, the good is called a luxury good.

Question

Quizplus · Accepted Answer

When the income elasticity of demand for a good is negative, the good is called an inferior good, not a luxury good. A luxury good has a positive income elasticity of demand, meaning that as income increases, the demand for the good also increases.

Scenario 5.1 The Demand for Noodles Is Given by the Following Equation