Q.Fill in the blank using appropriate alternatives given in the brackets:
Income elasticity of demand for inferior goods is _______.

The economic term is Income elasticity of demand — it measures how responsive quantity demanded is to a change in the consumer's income, other things constant. Answer: Income elasticity of demand.

Why: Elasticity of demand has three main types depending on the factor that changes:

• Price elasticity — response of quantity demanded to a change in the good's own price.
• Income elasticity — response of quantity demanded to a change in income (Ey = percentage change in quantity demanded / percentage change in income). …

The relationship between income and demand for inferior goods is inverse — a rise in income leads to a fall in their demand (negative income elasticity).

Income elasticity of demand measures how the quantity demanded of a good responds to a change in the consumer's income.

• For normal goods, the relationship is direct/positive — higher income raises demand. …

The correct alternative is negative.

Income elasticity of demand (Ey) links the change in quantity demanded to a change in income. For a normal good it is positive (income up, demand up). For an inferior good the relation is inverse — as income rises consumers switch to superior substitutes and buy less of the inferior good — so income elast …