The income elasticity of demand for luxury items, such as diamonds, tends to be large (greater than 1).

Question

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Luxury items are associated with higher incomes and are often considered to be status symbols. As income increases, consumers may be more likely to purchase luxury items, leading to a large income elasticity of demand (i.e., the percent change in quantity demanded is more than the percent change in income).

The Income Elasticity of Demand for Luxury Items, Such as Diamonds