Question

To determine whether a good is considered normal or inferior, one could examine the value of the

a. cross-price elasticity of demand for that good.
b. price elasticity of demand for that good.
c. price elasticity of supply for that good.
d. income elasticity of demand for that good.

Answer 1

Answer: d. income elasticity of demand for that good.

Step-by-step explanation:

A good is a normal when an increase in income leads to an increase in demand for the good and inferior when an increase in income leads to a decrease in demand for the good. Thus, to determine whether the good is normal or inferior we use income elasticity of demand for that good. If income elasticity is positive the good is a normal good. If income elasticity is negative, the good is inferior.