Because product X has a very small, positive income elasticity of demand, it is likely that product X
Is a
A) product with many good complements.
B) luxury.
C) necessity.
D) product with many good substitutes.

Question

Quizplus · Accepted Answer

A very small, positive income elasticity of demand suggests that as income increases, the demand for product X increases only slightly, which is characteristic of a necessity rather than a luxury or a product with many substitutes or complements. Necessities tend to have low income elasticity because people need to buy them regardless of changes in their income.

Because Product X Has a Very Small, Positive Income Elasticity