If a good has an income elasticity of 0.18,which of the following can be said about it?
A)It is a normal good,and a necessity.
B)It is a normal good,and a luxury good.
C)It is an inferior good,and a necessity.
D)It is an inferior good,and a luxury.

Question

Quizplus · Accepted Answer

When the income elasticity of a good is positive but less than 1, the good is a normal good and a necessity, meaning that as income increases, demand for the good increases but at a slower rate than income. A value of 0.18 indicates a relatively low income elasticity, which suggests that the good is not a luxury item but rather a necessary item.

If a Good Has an Income Elasticity of 0