question archive Which of the following statements is incorrect? a) Normal goods have income elasticities that are positive, b) Luxury goods have very high income elasticities, c) Inferior goods must also be necessity goods, d) Inferior goods have income elasticities that are negative
Which of the following statements is incorrect? a) Normal goods have income elasticities that are positive, b) Luxury goods have very high income elasticities, c) Inferior goods must also be necessity goods, d) Inferior goods have income elasticities that are negative
Subject:EconomicsPrice:2.88 Bought4
Which of the following statements is incorrect?
a) Normal goods have income elasticities that are positive,
b) Luxury goods have very high income elasticities,
c) Inferior goods must also be necessity goods,
d) Inferior goods have income elasticities that are negative.
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- The correct choice is c) Inferior goods must also be necessity goods,
Inferior goods do not mean necessity goods. A good becomes inferior due to the shift of consumer preference as their income rises over time. If the household income is lower, the tendency is household have to settle over cheaper goods. However, as the income of the household rises over time, consumers tend to buy more expensive goods leaving the similar good they used to buy.
