If income elasticity is negative, the good is

• A. Normal
• B. Inferior
• C. Luxury
• D. Giffen

Answer: (B)

Income elasticity of demand measures how quantity demanded responds to changes in income. If income rises and you buy more, elasticity is positive; if income rises and you buy less, elasticity is negative. A negative income elasticity means the good is inferior: as people become wealthier, they substitute away from this good toward better options and reduce the quantity they purchase. So the correct classification is inferior. Normal goods have positive income elasticity, meaning demand grows with income, and luxury goods also have positive elasticity but higher in magnitude. Giffen goods are a special case related to price effects, not determined solely by income elasticity, so a negative income elasticity points to inferiority rather than specifically identifying a Giffen good.