Question

The goods which have positive income elasticity of demand are called

• A. Giffen goods
• B. Normal goods
• C. Inferior goods
• D. Positive goods

Hint:

Normal goods: $E_y > 0$ (Positive); Inferior goods: $E_y < 0$ (Negative); Luxury goods: $E_y > 1$.

Answer 1

The Correct Option is B

Step 1: Understanding the Concept:
Income Elasticity of Demand ($E_y$) measures the responsiveness of quantity demanded to changes in consumer income.

Step 2: Detailed Explanation:
1. Normal Goods: Have positive income elasticity ($E_y > 0$), meaning as consumer income increases, the demand for the good increases.
2. Inferior Goods: Have negative income elasticity ($E_y < 0$), where demand falls as income rises.
3. Giffen Goods: A special subset of highly inferior goods where quantity demanded increases as price rises.

Step 3: Final Answer:
Thus, goods with positive income elasticity of demand are normal goods.