Answer on Macroeconomics Question for robin
Luxury goods are said to have high income elasticity of demand: as people become wealthier, they will buy more and more of the luxury good. This also
means, however, that should there be a decline in income its demand will drop.
Income elasticity of demand is not constant with respect to income, and may
change sign at different levels of income. That is to say, a luxury good may
become a normal good or even an inferior good at different income levels, e.g. a wealthy person stops buying increasing numbers of luxury cars for his
automobile collection to start collecting airplanes (at such an income level,
the luxury car would become an inferior good).
Need a fast expert's response?Submit order
and get a quick answer at the best price
for any assignment or question with DETAILED EXPLANATIONS!