If the income elasticity of demand is 2,the good is
A)a luxury.
B)a normal good (but not a luxury).
C)an inferior good.
D)a Giffen good.

Question

Quizplus · Accepted Answer

If the income elasticity of demand is greater than one, then the good is considered a luxury as the demand for the good increases more than proportionately to income. In this case, income elasticity of demand is 2, which is greater than one, so the good is a luxury good.

If the Income Elasticity of Demand Is 2,the Good Is