question archive The demand of good x increases when its price increases at certain market situation
The demand of good x increases when its price increases at certain market situation
Subject:EconomicsPrice:2.88 Bought3
The demand of good x increases when its price increases at certain market situation. If we measure the income elasticity of the demand of good x this will be:
a. 0
b. could be positive or negative.
c. negative.
d. necessarily -1.
e. positive.
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The answer is (c) negative. When the demand for good x increases as its prices increases, that's an indication that good x is a Giffen good. All Giffen goods are inferior, but not all inferior goods are Giffen. The income elasticity of demand for a Giffen good is negative.
