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According to the source, someone with a higher income might buy fewer hamburgers because they are buying more steak instead. What does this example illustrate?
AAn inferior good, with negative income elasticity of demand
BA normal good, with positive income elasticity of demand
CA substitute good, with positive cross-price elasticity
DA complement good, with negative cross-price elasticity
Answer & Solution
Correct answer: A. An inferior good, with negative income elasticity of demand
1. In this example, a rise in income causes a fall in the quantity of hamburgers bought.
2. A negative relationship between income and quantity demanded means income elasticity of demand is negative.
3. The source calls a good with negative income elasticity an inferior good.
4. This is not a cross-price example, since it involves the buyer's own income changing, not the price of another good.
_Source: OpenStax Principles of Microeconomics for AP Courses (CC BY 4.0), Ch 5 "Elasticity", section 5.4 | Elasticity in Areas Other Than Price_
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