Today's Question
Income elasticity measures how demand changes when income changes. 'Normal goods' have positive income elasticity (you buy more when richer). 'Inferior goods' have negative elasticity (you buy LESS when richer). Give an example of a good that might be 'inferior' for you personally - something you'd buy less of if your income doubled.
Model Answer
Common examples: Instant ramen, bus tickets, generic store brands, used cars. When income rises, people 'upgrade' - from ramen to restaurant meals, from bus to car, from generic to name brands. Note: The same good can be normal for some people and inferior for others. A wealthy person might see Netflix as 'inferior' (preferring live theater), while a student sees it as 'normal' (upgraded from free YouTube).