Answer to Question #221357 in Economics for Bea

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.

So, the correct answer is C.