1 answer

In the competitive market model, if the income elasticity of demand for a commodity is 07,...

Question:

In the competitive market model, if the income elasticity of demand for a commodity is 07, a fall in consumers incomes of 10% will: (a) shift the demand curve for the commodity to the right X (b) shift the demand curve for the commodity to the left (c) reduce the quantity demanded by 7% (d) reduce the quantity demanded by 07%

In the competitive market model, if the income elasticity of demand for a commodity is 07, a fall in consumers' incomes of 10% will: (a) shift the demand curve for the commodity to the right X (b) shift the demand curve for the commodity to the left (c) reduce the quantity demanded by 7% (d) reduce the quantity demanded by 07%

Answers

Correct option is (a).

When income elasticity is negative, the good is an inferior goods and its demand increases (decreases) when consumer income falls (rises). Higher (lower) demand will shift the demand curve toward right (left).

.

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