Question

For an inferior good with a downward sloping demand curve:

• A. The price elasticity of demand is negative; the income elasticity of demand is negative.
• B. The price elasticity of demand is positive; the income elasticity of demand is negative.
• C. The price elasticity of demand is negative; the income elasticity of demand is positive.
• D. The price elasticity of demand is positive; the income elasticity of demand is positive.

Answer 1

The correct option is A

The price elasticity of demand is negative; the income elasticity of demand is negative.

A. For an inferior good demand falls as income increases. The quantity demanded falls as price increases; this means the income elasticity and the price elasticity will both be negative.