CFA Practice Question

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CFA Practice Question

For inferior goods, income elasticity is ______.

A. greater than 0
B. greater than 1
C. less than 0
Correct Answer: C

Definition of inferior goods: A good that has a negative income elasticity; as consumer income rises, the demand for that good falls.

User Contributed Comments 21

User Comment
danlan Is there any example of inferior goods?
thedeuce cabbage.... generic food... ramen noodles
wroger junk food
gsuwp taking the bus
patsy cabbage?! generally supermarket own brand produce... though some US text books give public transport as an example!!
mansi If you tale income elasticity to be %change in quantity demanded of inferior good/%change in income

The movement of income and quantity demamned for inferior goods has an inverse relationship. so the income elsticity will be less than 0.
amieguo inferior good <0
nomral good 0< <1
luxury >1
tanyc Is the income elasticity of normal good always between zero and one as posted by amieguo?
Just to confirm.thanks.
Rotigga Goods from dollar stores are examples of inferior goods.
Frehner CFA study material
ridone read the question carefully! Income elasticity is in question not price elasticity of demand.
TUFF potatoes,public transport,etc
mrushdi HOW about CFA STUDY MATERIAL ???
endlessfin1te CFA study material is not an inferior, you will likely comsume more if you have more income.
shwetad yes....bus is when we have less money we take the bus thou it is time consuming....but when we have more money we may prefer a train or plane to travel as it saves time too..
past1sttime I love ramen noodles
wulin CFA study material after the CFA exam being held.
gill15 should be in the next unit...question is pretty much impossible right now with what I know unless you all are super geniuses
thekobe a flat in the bronx for example, if you have more income you would like to get one in times square
nabilhjeily well when u have more money ull buy less inferior goods because basically you can afford it
bidisha thanks mansi
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