Which of the following statement is true regarding necessities goods? a) Demand of these products decrease with the increase of income b) The income elasticity of demand for necessities goods would be between -1 to +1 c) Demand of these goods are highly sensitive to price and market changes d) None of the above
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Necessity Goods
Explanation
Necessity goods are those goods whose demand decreases with the increase in income.So the correct option is A) i.e. Demand of product decrease with the increase of income.
These goods are:
- A type of normal goods.
- Recorded as on repeat purchases which a consumer purchase regularly on finishing of the previous product .
- For example : a haircut, alcohol , electricity , water etc.
- Oftenly produced by public utility.
- Having income elasticity of demand lower than unity.
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