If a good is a luxury the income elasticity of demand must be
A)Positive and greater than 1
B)Merely positive (not necessarily greater than 1)
C)Zero
D)Negative

Question

Quizplus · Accepted Answer

Luxury goods are considered as non-essential or discretionary items, and are sought after when consumers have extra income to spend. Therefore, if income increases by a certain percentage, the quantity demanded of luxury goods increases by a greater percentage. This means that the income elasticity of demand for luxury goods is positive and greater than 1.

If a Good Is a Luxury the Income Elasticity of Demand