If the income elasticity of demand is 0.5,the good will be a(n)________ good.
A) complement
B) substitute
C) necessity
D) inferior
E) luxury

Question

Quizplus · Accepted Answer

When the income elasticity of demand is positive but less than 1 (0 < elasticity < 1), it indicates that the good is a necessity. This means that as income increases, demand for the good increases, but at a slower rate than the increase in income.

If the Income Elasticity of Demand Is 0