If the income elasticity of demand for a good is greater than one, it implies that:
A) as consumers' incomes increase, the quantity demanded of the good falls.
B) sales of the good are highly sensitive to changes in consumers' income.
C) the quantity demanded of the good increases during a recession.
D) an increase in consumers' income will lead to a proportionate increase in sales of the good.
E) sales of the good are highly sensitive to changes in the prices of other goods.

Question

Quizplus · Accepted Answer

Income elasticity of demand greater than one indicates that the good is a luxury item, meaning its demand increases more than proportionally as consumer income increases, showing high sensitivity to income changes.

If the Income Elasticity of Demand for a Good Is