If you enjoy buying luxury goods more than buying groceries, your income elasticity of demand for luxury goods will be less elastic than for groceries.

Question

Quizplus · Accepted Answer

Income elasticity of demand measures how the quantity demanded of a good responds to a change in income. Luxury goods typically have a high income elasticity of demand because as income increases, people buy more of these goods. Groceries, being necessities, have a lower income elasticity of demand because people need to buy them regardless of changes in income.

If You Enjoy Buying Luxury Goods More Than Buying Groceries