Question

Assume that as your income increases, your consumption of burgers decreases. We can assume that your income elasticity of demand for burgers is what? A) BETWEEN 0-1 B) GREATER THAN 1 C) EQUAL TO 1 D) NEGATIVE

Answer 1

With an increase in the income the consumption of the inferior goods decrease. If Burger was normal good its consumption would have increased but to a lesser level compared to income, then burger would have been a normal good. If the consumption of Burger would have increased with the rise in the income level. Then the Burger would have been a luxury good.

Here, the income elasticity of Burger would be Negative. As with the increase in income, the consumption of burger has decreased.