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A normal good can be distinguished from an inferior good because a normal good has: a
A normal good can be distinguished from an inferior good because a normal good has:
a. a negative income elasticity of demand.
b. a positive income elasticity of demand.
c. a positive cross-price elasticity of demand.
d. a positive price elasticity of demand.
Expert Solution
Answer: B
Income elasticity of demand measures the percent change in quantity demanded over the percent change in income. A normal good sees demand rise with income and thus the income elasticity of demand will be positive since both the numerator and denominator have the same sign. If a good was inferior, then the numerator and the denominator would have different signs and income elasticity would be negative.
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