If a household increases its consumption of a good by 10 percent when its income increases by 5 percent,then the good is
A)an inferior good.
B)a luxury.
C)a necessity.
D)both an inferior good and a necessity.
E)an unclassified good.

Question

Quizplus · Accepted Answer

When the consumption of a good increases more than the increase in income, it is classified as a luxury good. In this case, the household increased their consumption of the good by 10 percent which is twice the increase in their income. Therefore, the good is a luxury.

If a Household Increases Its Consumption of a Good by 10