The item below likely to have the highest income elasticity of demand is:
A)a luxury cruise to several European countries.
B)water.
C)breakfast cereal.
D)a hamburger.

Question

Quizplus · Accepted Answer

A luxury cruise to several European countries is likely to have a high income elasticity of demand because it is a luxury item that people with higher incomes are more likely to purchase. As income increases, demand for such an item is likely to increase at a faster rate than for necessities like water, breakfast cereal or a hamburger.

The Item Below Likely to Have the Highest Income Elasticity