It is likely that ______________ has an income elasticity less than 1,and _____________ have an income elasticity more than 1.
A) coffee; sailboats
B) sailboats; cars
C) vacations; cell phones
D) filet mignon; chicken

Question

Quizplus · Accepted Answer

Coffee is a necessity for many people, so its income elasticity is likely less than 1, meaning demand doesn't increase proportionally with income. Sailboats are luxury items, so their income elasticity is likely more than 1, meaning demand increases more than proportionally with income.

It Is Likely That ______________ Has an Income Elasticity Less