Which of the following is most likely to have an income elasticity between 0 and 1?
A)European vacation
B)Store brand cola
C)Milk
D)Frappuccino

Question

Quizplus · Accepted Answer

Milk is a basic necessity and its consumption is not highly dependent on a consumer's income. Therefore, it is most likely to have an income elasticity between 0 and 1. Option A is likely to have a higher income elasticity as it is a luxury item. Option B and D are likely to have income elasticities that are closer to one as they are marginally more expensive than their substitutes.

Which of the Following Is Most Likely to Have an Income