Question

What would be the income elasticity of demand when an increase in income of the consumer leads to a fall in the amount purchased of a commodity?

Options

• Negative

• Positive

• Greater than 1

• Less than 1

Answer 1

Negative

Explanation:

Income elasticity of demand for a commodity is said to be negative when an increase in the income of the consumers leads to a fall in the amount purchased of a commodity, and vice versa.