Q294
A necessity is defined as a good having
A.
A positive income elasticity of demand
B.
A negative income elasticity of demand
C.
An income elasticity of demand between zero and 1
AnswerD.
An income elasticity of more than 1
Answer: Option C
Solution
Answer: Option C
Solution:
A necessity is defined as a good having an income elasticity of demand between zero and 1. If income elasticity of demand of a commodity is less than 1, it is a necessity good. If the elasticity of demand is greater than 1, it is a luxury good or a superior good. A zero income elasticity of demand occurs when an increase in income is not associated with a change in the demand of a good.