What does E m less than zero indicate about a good?

When the income elasticity of demand (E m) is less than zero, it indicates that the good in question is an inferior good. This means that as consumer income increases, the quantity demanded for this good decreases. Inferior goods are often those that consumers turn to when their income is lower; when they are able to afford more expensive alternatives, they tend to buy less of the inferior good.

In contrast, normal goods experience an increase in quantity demanded as consumer income rises, which would be indicated by an E m greater than zero. Elastic goods refer specifically to responsiveness to price changes rather than income, while luxury goods are typically a subset of normal goods that consumers buy more of as their income rises, meaning they too would have a positive E m. Understanding these classifications helps in determining consumer behavior in relation to income changes.