Which of the following goods (with their respective income elasticity coefficients in parentheses)will most likely suffer a decline in demand during a recession?
A) Dinner at a nice restaurant (+1.8)
B) Chicken purchased at the grocery store for preparation at home (+0.25)
C) Facial tissue (+0.6)
D) Plasma screen and LCD TVs (+4.2)

Question

Quizplus · Accepted Answer

Goods with high income elasticity coefficients, such as plasma screen and LCD TVs (+4.2), are considered luxury goods and will experience a larger decrease in demand during a recession compared to goods with lower income elasticity coefficients. Therefore, this is the most likely choice to suffer a decline in demand during a recession.

Which of the Following Goods (With Their Respective Income Elasticity