The income elasticity of demand is largest for
A)food.
B)clothing.
C)shelter.
D)used cars.
E)luxury cars.

Question

Quizplus · Accepted Answer

Luxury cars are considered luxury goods and have a high income elasticity of demand because they are highly sensitive to changes in consumer income. As people's incomes increase, they are more likely to purchase luxury cars, and as their incomes decrease, they are more likely to scale back on luxury purchases, such as cars.

The Income Elasticity of Demand Is Largest for