If a household increases its consumption of a good by 10 percent when its income increases by 1 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 percentage increase in consumption is greater than the percentage increase in income, the good is considered a luxury. In this case, a 10 percent increase in consumption for a 1 percent increase in income indicates that the good is a luxury item.

If a Household Increases Its Consumption of a Good by 10