Multiple Choice:
Products with a positive income elasticity greater than one are:
a)dying products
b)normal goods
c)luxury goods
d)inferior goods
Take a shot. Be sure to research the concepts of normal, inferior, and luxury goods. (hint: "dying products" are right out)
To determine which of the options are correct, let's first understand the concepts of normal goods, inferior goods, and luxury goods.
Normal Goods: Normal goods are products for which demand increases as income increases. In other words, the demand for normal goods is positively correlated with income.
Inferior Goods: Inferior goods are products for which demand decreases as income increases. In other words, the demand for inferior goods is negatively correlated with income.
Luxury Goods: Luxury goods are high-end products that people typically buy more of when their income increases. They are considered to be non-essential and often associated with higher levels of income.
Now, let's analyze the options:
a) Dying products: This option is unlikely to be correct because income elasticity refers to the relationship between income and demand, not the lifecycle stage of a product.
b) Normal goods: This option aligns with the definition of a product with a positive income elasticity greater than one. A normal good is a product for which demand increases as income increases.
c) Luxury goods: This option also aligns with the definition of a product with a positive income elasticity greater than one. Luxury goods are associated with higher income levels and tend to have a strong positive correlation between income and demand.
d) Inferior goods: This option is incorrect because inferior goods have a negative income elasticity, meaning that demand decreases as income increases.
Therefore, based on the definitions provided, the correct answer is: b) normal goods and c) luxury goods.