Of the following, which one is most likely to have a negative income elasticity of demand?

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Explore Elasticities of Demand and Supply Test. Enhance understanding with multiple-choice questions and detailed explanations. Start your journey to mastering economic principles!

Multiple Choice

Of the following, which one is most likely to have a negative income elasticity of demand?

Explanation:
Income elasticity of demand shows how much quantity demanded changes when income changes. A negative elasticity means the good is inferior: people buy less of it as their income rises. Inter-city bus travel fits this pattern because as incomes grow, travelers often substitute toward more expensive options like cars, trains, or flights, reducing demand for the cheaper bus option. The other items—shoes, tennis balls, and frozen yogurt—are typically normal goods, whose demand tends to increase as income rises, giving them positive income elasticities.

Income elasticity of demand shows how much quantity demanded changes when income changes. A negative elasticity means the good is inferior: people buy less of it as their income rises. Inter-city bus travel fits this pattern because as incomes grow, travelers often substitute toward more expensive options like cars, trains, or flights, reducing demand for the cheaper bus option. The other items—shoes, tennis balls, and frozen yogurt—are typically normal goods, whose demand tends to increase as income rises, giving them positive income elasticities.

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