Luxury goods tend to have income elasticities of demand that are
A)greater than 1.
B)greater than zero but less than 1.
C)less than the income elasticities of demand for necessities.
D)negative.
E)first positive and then negative as income increases.

Question

Quizplus · Accepted Answer

Luxury goods tend to have income elasticities of demand greater than 1, meaning that as income increases, the demand for luxury goods increases at a faster rate than the increase in income. This is because as consumers' disposable income increases, they have more money to spend on non-essential items, such as luxury goods.

Luxury Goods Tend to Have Income Elasticities of Demand That