Answer to Question #220970 in Economics for Beaut

Question

If a 10% increase in income causes a 20% increase in the quantity demanded for a good or service. It can be concluded that

•  A. the good or service is a necessity.
•  B. the income elasticity of the demand for the good or service is negative.
•  C. the good or service is a luxury good.
•  D. the price elasticity of the good or service is greater than one.

Answer 1

If a 10% increase in income causes a 20% increase in the quantity demanded for a good or service, then it can be concluded that the good or service is a luxury good, because there is a positive relationship between income and quantity demanded, and increse in the quantity demanded is higher than the increase in income.

So, the correct answer is C.