- CFA Exams
- CFA Level I Exam
- Topic 2. Economics
- Learning Module 8. Topics in Demand and Supply Analysis
- Subject 3. Substitution Effect, Income Effect, Normal and Inferior Goods
CFA Practice Question
For inferior goods, income elasticity is ______.
B. greater than 1
C. less than 0
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 good...as 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 |