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Question
Fill in the blank with appropriate alternatives given below:
Income elasticity of demand for inferior goods is __________.
Options
positive
negative
zero
greater than one
Solution
Income elasticity of demand for inferior goods is negative.
Explanation:
Inferior goods are those goods the demand for which is negatively related to income. In other words, inferior goods are those goods the demand for which decreases with an increase in income. Therefore, income elasticity of demand for inferior goods is negative.
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