Question

For which of the following types of goods would the income elasticity of demand be positive and relatively large?A. luxuriesB. all normal goodsC. all inferior goodsD. goods for which there are many good complements

Answer 1

Answer:

Option (A) is correct.

Explanation:

Luxury goods refers to the goods which are having positive income elasticity of demand. Positive income elasticity of demand is defined as the direct relationship between the demand of the goods and the income of the consumers.

If there is an increase in the income level of consumers then as a result there is an increase in the demand for luxury goods by a greater proportion. That's why the income elasticity of demand is relatively larger.