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    Question

      If income elasticity is less than 1 then the goods

    are
    A Necessity Correct Answer Incorrect Answer
    B Inferior Correct Answer Incorrect Answer
    C Luxury Correct Answer Incorrect Answer
    D Giffen Correct Answer Incorrect Answer

    Solution

    A positive income elasticity of demand is associated with normal goods; an increase in income will lead to a rise in demand. If income elasticity of demand of a commodity is less than 1, it is a necessity good. If the income elasticity of demand is greater than 1, it is a luxury good or a superior good.

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