Question:
If the demand for public transport service decreases when a person’s income increases, then public transport service is an example of
(1) an inferior good.
(2) a free good.
(3) a Giffen good.
(4) a normal good.
(5) a public good.
Correct Answer:
(1)
Answer Explanation:
An inferior good is explicitly defined by a negative income elasticity of demand. This means that as a consumer’s income rises, they switch to higher-quality, more expensive alternatives (such as buying a private car or taking taxis), causing their demand for the “inferior” option (public transport) to drop.
Topic: Consumer Theory Year: 2019
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