Which of the following would you expect to have the highest income elasticity of demand?
A) an overseas travel holiday
B) a ticket to see a ballet performance by a renowned international act
C) a ticket to see a move at the local theatre
D) a picnic by the beach

Question

Quizplus · Accepted Answer

An overseas travel holiday is likely to have the highest income elasticity of demand as it is a luxury and discretionary good, and consumers' demand for it is likely to increase as they have higher incomes. On the other hand, options like a movie or a picnic are more affordable and have a relatively lower income elasticity of demand.

Which of the Following Would You Expect to Have the Highest