Answer to Question #216537 in Economics of Enterprise for Devine

Question

ceteris paribus, if 10% increase in income has caused a 20% decrease in the quantity of gas demanded then from this we can conclude that gas is

Answer 1

Gas is an Inferior good

Income elasticity = $\frac {\% change in quantity demanded} {\% change in income}$

Income Elasticity =$\frac {-20}{10} =-2$

Remember that negative income elasticity of demand is associated with Inferior goods.