To determine whether a good is considered normal or inferior, one could examine the value of the a. income elasticity of demand for that good. b. price elasticity of demand for that good. c. price elasticity of supply for that good. d. cross-price elasticity of demand for that good.

Question

Gwendolyn Mcdaniel

Business

6 April, 22:21

To determine whether a good is considered normal or inferior, one could examine the value of the a. income elasticity of demand for that good. b. price elasticity of demand for that good. c. price elasticity of supply for that good. d. cross-price elasticity of demand for that good.

+5

Answers (1)

Know the Answer?

Trey · Answer 1

The correct answer is letter "A": income elasticity of demand for that good.

Explanation:

Normal goods are those whose quantity demanded increases as the income increase as opposed to inferior goods whose quantity demanded decreases as long as the income increase.

The elasticity of demand measures the change in quantity demanded when other variable changes. That other variable is usually price but could be changed for income.

Then, income elasticity of demand would be calculated by dividing the percentage change in quantity demanded by the percentage change in income. If the result is equal or higher than one (1) the product is considered elastic or, in this case, normal. If the result is lower than 1, the good is inelastic or inferior.