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      Question

      The goods for which demand increases when income

      increases, and falls when income decreases but price remains constant, i.e. with a positive income elasticity of demand are known as:
      A Normal Goods Correct Answer Incorrect Answer
      B Inferior Goods Correct Answer Incorrect Answer
      C Luxury Good Correct Answer Incorrect Answer
      D Necessity Goods Correct Answer Incorrect Answer
      E None of these Correct Answer Incorrect Answer

      Solution

      An inferior good is a good whose quantity demanded decreases when consumer income rises (or quantity demanded rises when consumer income decreases). In economics, a luxury good (or upmarket good) is a good for which demand increases more than proportionally as income rises Necessity Goods are those goods for which demand increases proportionally less than income.

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