As incomes rise, a larger proportion of income will be spent on motoring. This suggests that income elasticity of demand is greater than one.

Question

Quizplus · Accepted Answer

When the income elasticity of demand is greater than one, it indicates that the demand for a good is highly responsive to changes in income, meaning as incomes rise, consumers will spend a significantly larger proportion of their income on that good, in this case, motoring.

As Incomes Rise, a Larger Proportion of Income Will Be