Q335
If the income elasticity is greater than one, the commodity is
A.
Necessity item
B.
Luxury item
AnswerC.
Inferior good
D.
None
Answer: Option B
Solution
Answer: Option B
Solution:
If the income elasticity is greater than one, the commodity is Luxury item. Luxury goods represent normal goods associated with income elasticities of demand greater than one. Consumers will buy proportionately more of a particular good compared to a percentage change in their income.