Question

Explain the concept of income elasticity of demand. How would you define necessities &

luxuries on the basis of income elasticity of demand?​

Answer 1

Answer:

Income elasticity of demand refers to the sensitivity of the quantity demanded for a certain good to a change in real income of consumers who buy this good, keeping all other things constant. ... With income elasticity of demand, you can tell if a particular good represents a necessity or a luxury.