To say that turnips are inferior goods means that the income elasticity

To say that turnips are inferior goods means that the income elasticity

• A. is definitely greater than 1.
• B. is negative.
• C. is positive but could be greater than or less then (or equal to) 1.
• D. is definitely between 0 and 1.

Answer: (B)

Income elasticity of demand measures how much the quantity demanded changes in response to a change in income. If a good is inferior, higher income leads people to buy less of it, so the quantity demanded moves in the opposite direction of income. That makes the income elasticity negative. The magnitude can be less than 1 or greater than 1, but the sign is the key element that marks it as inferior. The other descriptions describe normal goods, where demand increases with income (positive elasticity) or where the elasticity is positive but could be less than 1. For turnips as an inferior good, the defining feature is a negative income elasticity: a rise in income reduces quantity demanded. For example, a 10% income increase might reduce turnip purchases by 3% (elasticity = -0.3).

Income elasticity of demand measures how much the quantity demanded changes in response to a change in income. If a good is inferior, higher income leads people to buy less of it, so the quantity demanded moves in the opposite direction of income. That makes the income elasticity negative. The magnitude can be less than 1 or greater than 1, but the sign is the key element that marks it as inferior. The other descriptions describe normal goods, where demand increases with income (positive elasticity) or where the elasticity is positive but could be less than 1. For turnips as an inferior good, the defining feature is a negative income elasticity: a rise in income reduces quantity demanded. For example, a 10% income increase might reduce turnip purchases by 3% (elasticity = -0.3).