Question

Match the following types of elasticities of good X with the corresponding types of goods. (E = elasticity)

• A. Normal Goods
• B. Inferior Goods
• C. Substitute Goods
• D. Complementary Goods

Answer 1

(i) For normal goods, the relationship between income and demand is positive. Income elasticity is positive.

(ii) For inferior goods, the relationship between income and demand is negative. Income elasticity is negative.

(iii) For substitute goods, elasticity is positive.

(iv) For complementary goods, cross-price elasticity is negative.