Inferior Good with Elastic Income Demand

Steps:

• Identify the demand shift: A 10% income increase shifts demand from D to D1, indicating the direction of change.
• Classify the good: Leftward shift (D to D1) means demand decreases as income rises, defining good X as inferior.
• Assess elasticity: Large leftward shift implies quantity demanded falls more than proportionally to the 10% income rise, so |income elasticity| > 1.
• Confirm type: Inferior goods have negative income elasticity; magnitude >1 indicates elastic demand.

Why C is correct:

• For inferior goods, income elasticity is negative; a shift where |%ΔQ| > %Δincome (here >10%) means elastic demand per the income elasticity formula (YED = %ΔQd / %ΔY).

Why the others are wrong:

• A: Rightward shift expected for normal goods, not leftward.
• B: Inelastic would show small leftward shift, not large.
• D: Normal goods have positive elasticity and rightward shift.

Final answer: C