Jane received a 10 percent increase in her salary and purchased 20 percent more jewelry. For Jane, jewelry
A) has an income elasticity of two.
B) is a normal good.
C) is a luxury good.
D) is all of the above.

Question

Quizplus · Accepted Answer

Jewelry is a normal good because Jane buys more as her income increases. It is a luxury good because the percentage increase in jewelry purchased (20%) is greater than the percentage increase in income (10%), indicating an income elasticity greater than one, specifically two in this case.

Jane Received a 10 Percent Increase in Her Salary and Purchased