What good is most likely to have a negative income elasticity of demand?
A) steak
B) caviar
C) designer clothing
D) pizza
E) instant noodles

Question

Quizplus · Accepted Answer

Instant noodles are often considered a low-cost substitute for a more expensive meal. As a result, as income increases, demand for instant noodles is likely to decrease, leading to a negative income elasticity of demand. The other choices, such as steak, caviar, and designer clothing, are luxury goods that are often associated with higher levels of income, leading to a positive income elasticity of demand. Pizza may have a positive or negative income elasticity depending on whether consumers view it as a necessity or a luxury.

What Good Is Most Likely to Have a Negative Income