Question

If a good is a luxury, its income elasticity of demand is?

• A. Positive and less than $1$
• B. Negative but greater than $-1$
• C. Positive and greater than $1$
• D. Zero

Answer 1

Answer: (C)

Positive and greater than $1$

If a good is a luxury, its income elasticity of demand is Positive and greater than 1. If income elasticity of demand of a commodity is less than 1, it is a necessity good. If the elasticity of demand is greater than 1, it is a luxury good or a superior good