An economist has determined that the income elasticity of demand for a movie streaming service is 1.2. How should she interpret this value?
A) Movie streaming services are normal, luxury goods.
B) Movie streaming services are inferior, necessity goods.
C) Movie streaming services are normal, necessity goods.
D) Movie streaming services are inferior, complementary goods.

Question

Quizplus · Accepted Answer

An income elasticity of demand greater than 1 indicates that the product is a normal good and considered a luxury, as demand increases more than proportionally with income.

An Economist Has Determined That the Income Elasticity of Demand