Asked by Ruthny Bonnet on Apr 29, 2024
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Normal goods have negative income elasticities of demand, while inferior goods have positive income elasticities of demand.
Income Elasticities
Income elasticities measure how the quantity demanded of a good changes in response to a change in consumers' income.
Normal Goods
Goods for which demand increases as consumer income rises, and decreases as consumer income falls.
Inferior Goods
Goods for which demand decreases as consumer income rises, in contrast to normal goods, where demand increases with higher incomes.
- Distinguish between normal and inferior goods using income elasticity of demand.
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Learning Objectives
- Distinguish between normal and inferior goods using income elasticity of demand.
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