Mensy Ltd produces two goods that have income elasticity values as follows. Good A=-0.5 and good B=4 Explain the income elasticity of demand for good A and good B

Md Ariful Islam

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The Income Elasticity of Demand measures the rate of response of quantity demand due to a raise (or lowering) in a consumers income. Good A has IEoD < -0.5. It is an Inferior Good and Negative Income Inelastic . Inferior goods can be viewed as anything a consumer would demand less of if they had a higher level of real income. Good B has IEoD > 1. It is a Luxury Good and Income Elastic. A good is considered a luxury when a person must have a certain income or wealth level in order to feasibly purchase it.
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