When consumers' incomes decline during a recession,they increase their consumption of instant coffee and reduce their consumption of other beverages.Therefore,instant coffee:
A) is a necessity because consumers buy more during a recession.
B) has a negative income elasticity of demand.
C) has an income elasticity of demand greater than zero but less than one.
D) is normal.

Question

Quizplus · Accepted Answer

The fact that consumers increase their consumption of instant coffee during a recession when their incomes decline suggests that instant coffee has a negative income elasticity of demand. This means that as consumers' incomes decrease, their demand for instant coffee increases. Therefore, choice B is the best answer. Choices A, C, and D are incorrect.

When Consumers' Incomes Decline During a Recession,they Increase Their Consumption