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Economics (AS & A Level) · Oct / Nov 2023 · Paper 13 · Question 7

9708Price elasticity, income elasticity and cross elasticity of demand

When the incomes of consumers of good X fall by 5%, under which conditions will the demand curve shift furthest to the right?

  1. Ainferior good; income elasticity of demand for good X = –0.8
  2. Binferior good; income elasticity of demand for good X = –1.2
  3. Cnormal good; income elasticity of demand for good X = +0.9
  4. Dnormal good; income elasticity of demand for good X = +1.5

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Correct answer: B. inferior good; income elasticity of demand for good X = –1.2

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