Luxuries are goods with income elasticities that are _____, and necessities are goods with income elasticities that are:
A) positive; negative.
B) negative; positive.
C) between 0 and 1; greater than 1.
D) greater than 1; between 0 and 1.

Question

Quizplus · Accepted Answer

Luxuries have income elasticities greater than 1, meaning demand for them increases more than proportionally as income increases. Necessities have income elasticities between 0 and 1, indicating demand increases with income but at a slower rate.

Luxuries Are Goods with Income Elasticities That Are _____, and Necessities