Income elasticity of demand for professional haircuts is found to be 1.7.This service is a
A) normal good and necessity good.
B) luxury good but not a normal good.
C) necessity good but not a normal good.
D) substitute good.
E) normal good and a luxury good.

Question

Quizplus · Accepted Answer

The income elasticity of demand for professional haircuts being 1.7 indicates that it is a normal good, as an increase in income leads to a more than proportionate increase in the quantity demanded. Additionally, as it is a personal grooming service, it can also be considered a luxury good as people may spend a significant amount on it to enhance their appearance.  Therefore, the correct choice is E - a normal good and a luxury good.

Income Elasticity of Demand for Professional Haircuts Is Found to Be