Chapter 48, Problem 6MCQ

To determine

The correct option if Z buys more cereal when his income decreases.

Explanation of Solution

If Z buys more cereal when his income decreases then cereal has a negative income elasticity of demand because if Z’s income increases, he will move to another substitute.

Therefore, the correct option is h.

Economics Concept Introduction

Introduction:

Elasticity of demand represents the measure of sensitivity of demand to price that shows how change in price or supply of goods affects the quantity demanded.