Type(s) of income elasticity of demand is/are

The correct answer is: D. All of the above

Income elasticity of demand is a measure of how responsive the demand for a good or service is to changes in income. It is calculated by dividing the percentage change in the quantity demanded of a good or service by the percentage change in income.

There are three types of income elasticity of demand:

• Negative income elasticity means that the demand for a good or service decreases as income increases. This is the case for inferior goods, which are goods that people consume less of as their income increases. For example, as people’s incomes increase, they may choose to eat out less and cook at home more.
• Zero income elasticity means that the demand for a good or service does not change as income changes. This is the case for necessities, which are goods that people must consume regardless of their income. For example, people will always need to buy food, even if their income increases.
• Unit income elasticity means that the demand for a good or service increases by the same percentage as income increases. This is the case for normal goods, which are goods that people consume more of as their income increases. For example, as people’s incomes increase, they may choose to buy a new car or take more vacations.

It is important to note that the income elasticity of demand can vary depending on the good or service and the individual consumer. For example, the income elasticity of demand for food is likely to be lower for people who are already living in poverty than for people who are already well-off.