PRC-3 · Chapter 11 · Question 19 of 57
Statistical analysis shows that the Income Elasticity of Demand (YED) for public bus transport in a city is -0.8. Based on this negative value, public bus transport is classified as a(n):
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: C) Inferior good
Explanation
A negative income elasticity means that as consumers' incomes increase, they consume less of the good (switching to taxis or cars), which is the definition of an inferior good.
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