Which of the following tends to be true of the income elasticity of demand for food?
A) At low levels of income, it tends to be fairly high; but as the level of income rises, it tends to fall.
B) It tends to be well above unity only at high levels of income.
C) It is usually zero, since we can only eat so much.
D) It tends to be well below unity only at low levels of income.
E) It tends to remain fairly constant at all levels of income.

Question

Quizplus · Accepted Answer

The income elasticity of demand for food tends to be high at low levels of income because people spend a larger proportion of their income on basic necessities like food. As income rises, people have more disposable income and may spend proportionally less on food, causing the income elasticity of demand for food to fall.

Which of the Following Tends to Be True of the Income