For the inferior goods, income elasticity is equals to :

Question

Accepted Answer

The correct option is 1:
The concept of income elasticity of demand measures the responsiveness of the quantity demanded for a good to a change in consumer income. It is calculated as the percentage change in quantity demanded divided by the percentage change in income. Goods are classified based on the sign of this elasticity. Inferior goods are those for which demand decreases as consumer income rises, and conversely, demand increases as consumer income falls. Think of public transport or cheap, unbranded food items; as a student's income increases, they tend to substitute these cheaper goods with higher-quality alternatives (like a private car or organic foods). Because the change in income (positive) and the change in demand (negative) move in opposite directions, the resulting income elasticity of demand for inferior goods is always negative.

The incorrect option is 2:
Positive income elasticity is characteristic of normal goods. For normal goods, as consumer income increases, the quantity demanded also increases, meaning income and demand move in the same direction, resulting in a positive sign.

The incorrect option is 3:
Infinite income elasticity implies an extremely high sensitivity to income changes, where any slight change in income leads to an infinitely large change in quantity demanded. While goods can be highly elastic, a strictly "infinite" elasticity is typically theoretical and not the defining characteristic of inferior goods.

The incorrect option is 4:
Zero income elasticity means that the quantity demanded for a good does not change at all, regardless of the change in consumer income. This characteristic applies to specific necessities where consumption is fixed, regardless of wealth, and is not a trait of inferior goods.