If a person's income rises and they do not increase their consumption, we can conclude that: A

Economics Jan 22, 2021

If a person's income rises and they do not increase their consumption, we can conclude that:

A. the good is not inferior.

B. their income elasticity of demand is zero.

C. the good is not normal.

D. no conclusions can be made without knowing the person's initial income and consumption levels.

Expert Solution

The correct answer is B. their income elasticity of demand is zero.

The income elasticity of demand is found by dividing the percentage change in quantity demanded by the percentage change in income. If a percentage change in income leads to a zero percent increase in consumption, the income elasticity of demand is zero.

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