An example of a good that likely has an income elasticity less than one is _____, while an example of a good that likely has an income elasticity greater than one is _____.
A) coffee; sailboats
B) sailboats; cars
C) vacations; cell phones
D) filet mignon; chicken

Question

Quizplus · Accepted Answer

Coffee is likely to have an income elasticity less than one because it is a staple good that people will continue to purchase even if their income decreases. Sailboats, on the other hand, are a luxury item and people are more likely to purchase them as their income increases, indicating an income elasticity greater than one.

An Example of a Good That Likely Has an Income