Which among the following regarding the nature of goods and income elasticity are correctly matched? Nature of Goods Income Elasticity 1. Necessity : Between 0 and 1 2. Luxury : More than 1 3. Inferior : More than 0 Select the answer using the code given below.

Income Elasticity of Demand (YED) measures how quantity demanded responds to changes in consumer income. Normal goods have a positive YED. Within normal goods, necessities are income-inelastic, meaning their YED is between 0 and 1 because demand increases less than proportionately to income. Luxury goods are income-elastic, with a YED greater than 1, as demand increases more than proportionately to income [1]. Conversely, inferior goods have a negative income elasticity (YED < 0) because demand falls as income rises [2]. Therefore, statement 1 (Necessity: 0 to 1) and statement 2 (Luxury: > 1) are correctly matched. Statement 3 is incorrect because inferior goods must have an elasticity less than 0, not more than 0.

Sources

1. [1] Microeconomics (NCERT class XII 2025 ed.) > Chapter 2: Theory of Consumer Behaviour > EXAMPLE 2.2 > p. 29
2. [2] Microeconomics (NCERT class XII 2025 ed.) > Chapter 2: Theory of Consumer Behaviour > 2.4.3 Normal and Inferior Goods > p. 24