An income elasticity of 0.6 indicates the good is a normal good with income inelastic response.

• A. Inferior.
• B. Normal good with income inelastic demand.
• C. Luxury good.
• D. Giffen good.

Answer: (B)

Income elasticity of demand measures how responsive quantity demanded is to changes in income. A positive value means the good is normal—demand rises when income rises. The size of the elasticity shows how strong that response is: values between 0 and 1 indicate income inelastic demand, so quantity changes less than proportionally with income.

An elasticity of 0.6 is positive and less than 1, meaning when income goes up by 1%, quantity demanded goes up by about 0.6%. That combination describes a normal good with income inelastic demand. If the elasticity were negative, it would be inferior. If it were greater than 1, it would be a luxury good.