Which of the following is most likely to be TRUE?
A) Income elasticity of demand for fur coats exceeds that of oatmeal.
B) Income elasticity of demand for oatmeal exceeds that of fur coats.
C) Income elasticity of demand for fur coats equals that of oatmeal.
D) It is not possible to make any prediction about relative income elasticities.

Question

Quizplus · Accepted Answer

Fur coats are a luxury good, and their demand typically increases more than proportionally as income rises, leading to a high income elasticity of demand. Oatmeal is considered a necessity with a lower income elasticity of demand, as consumption changes little with income changes.

Which of the Following Is Most Likely to Be TRUE