Question

A speedboat is considered to be a normal good and a luxury good. therefore, we would expect the income elasticity of demand to be:

Answer 1

Speedboat is considered to be a luxury good. Income elasticity is considered to be positive with the level of income which means if the income level is higher then the demand for luxury goods will also be higher. In this case, as the income increases, the demand of speedboat will be increased. Hence, speedboat has a positive relation with income elasticity of demand.