Paper 2 · June 2025 · Price Elasticity of Demand
In a UK survey of income elasticities (1998-2000), liquid whole milk had an income elasticity of demand of -0.17, while fish had an income elasticity of demand of +0.27. Based on these figures, liquid whole milk is classified as
Aa luxury good, since demand rises more than proportionately with income
Ban inferior good, since demand for it falls as income rises
Ca normal good, since demand for it rises as income rises
Da Giffen good, since demand rises as its own price rises
Explanation
A negative income elasticity of demand (-0.17) means quantity demanded falls as income rises, which is the definition of an inferior good; fish, with a positive elasticity, is instead a normal good.
Derived from ZIMSEC A-level Economics Paper 2 (Data Response), June 2025, Q1