Question

Use the income elasticity of demand to distinguish between a normal good and an inferior

good. In your explanation, provide the correct elasticity coefficient for each product and the

relationship between income and quantity demanded.

Answer 1

Normal goods possess an income elasticity demand which is positive. As income increases, extra goods are necessitated at each price glassy. Whereas inferior goods possess an income elasticity of demand which is negative. Thus, as consumers’ income advances, they purchase minimal low-grade goods.