The figure given below shows the demand curves for five products: A, B, C, D, and E.Figure 6.1

-Which of the following goods is likely to have an income elasticity of demand that is less than zero?
A)A luxury yacht
B)A beach house
C)A state-of-the-art cellular phone
D)A box of generic macaroni and cheese dinner
E)A dinner at a French restaurant

Question

The figure given below shows the demand curves for five products: A, B, C, D, and E.Figure 6.1
 
-Which of the following goods is likely to have an income elasticity of demand that is less than zero?
A)A luxury yacht 
B)A beach house 
C)A state-of-the-art cellular phone 
D)A box of generic macaroni and cheese dinner 
E)A dinner at a French restaurant

Quizplus · Accepted Answer

A box of generic macaroni and cheese dinner is a basic staple food item, and its demand is not likely to increase even as income rises. In fact, as consumers become more affluent, they may switch to more expensive, higher quality food items, which would decrease the demand for generic macaroni and cheese dinners. Therefore, the income elasticity of demand for this product is likely to be negative or close to zero.

The Figure Given Below Shows the Demand Curves for Five