The income elasticity of demand
A) is positive only.
B) is negative only.
C) must lie between -1 and +1.
D) can be positive, negative, or zero.

Question

Quizplus · Accepted Answer

The income elasticity of demand can be positive, negative, or zero. Positive income elasticity means that as income increases, demand for a good or service also increases. Negative income elasticity means that as income increases, demand for a good or service decreases. Zero income elasticity means that a change in income has no effect on demand for a good or service. Therefore, options A, B, and C are incorrect.

The Income Elasticity of Demand