Question

Discuss in detail, the two of income elasticity and substantiate the type of income elasticity most applicable

Answer 1

• Positive income elasticity of demand - this is where demand for a commodity increases with an increase in consumer income and decreases with a decrease in consumer income. Positive income elasticity of demand is associated with normal goods and is thus the most applicable.
• Negative income elasticity of demand - this is a condition where demand for a commodity decreases with an increase in consumer income and increases with a fall in consumer income. it is associated with inferior commodities.