If a spec temperature is given as 75° Fahrenheit, what is its equivalent in degrees Celsius? (Use the formula degrees F minus 32 multiplied by 0.556 equals degrees C.)
Visit a local body shop. Get permission to watch a professional painter at work. Write a one-page report about what you learned. If directions say to reduce a paint 33 percent and you need 1 gallon of paint, how many parts of both reducer and paint do you need?
Correct Answer: c. Income elasticity is positive and less than 1.
Income elasticity of demand measures how the quantity demanded of a good responds to changes in consumer income. It is calculated as the percentage change in quantity demanded divided by the percentage change in income.
A normal good is one for which demand increases as consumer income increases. This means that the income elasticity of demand for a normal good is positive. Within normal goods, we distinguish between necessities and luxuries:
- Necessities are normal goods with an income elasticity between 0 and 1. This means that as income increases, demand increases, but at a slower rate than income. For example, basic food items like bread or rice are necessities—people buy more when they earn more, but not dramatically more.
- Luxuries, on the other hand, have an income elasticity greater than 1. This means that demand increases more than proportionately with income. Examples include luxury cars or high-end electronics.
Choice (c), “income elasticity is positive and less than 1,” corresponds to necessities, which are a type of normal good. Hence, this is the correct answer.
Let’s examine why the other options are incorrect:
- (a) Income elasticity is zero: This indicates that changes in income have no effect on demand. Such goods are known as income inelastic or income-neutral (e.g., salt). These are not classified as normal goods.
- (b) Income elasticity is -1: This negative elasticity implies an inferior good, where demand decreases as income rises (e.g., instant noodles or public transport in some contexts).
- (d) Income elasticity is negative and less than -1: This also indicates an inferior good, and a strongly so—demand falls significantly as income increases.
In conclusion, normal goods always have positive income elasticity, and when it is between 0 and 1, the good is a necessity. Hence, option (c) is correct.
