Multiple choice

Which one of the following statements is not correct?

  1. Normal goods have a positive income elasticity of demand.

  2. Inferior goods have a negative income elasticity of demand.

  3. Necessity has an income elasticity of demand that is less than one.

  4. Luxury goods have an income elasticity of demand that is equal to one.
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

In economics, a luxury good is a good for which demand increases more than proportionally as income rises and is a contrast to a necessity good for which demand is not related to income.

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