If the income elasticity of demand for airline tickets is 1.8, this implies that:

Question

BlackTom AI · Accepted Answer

To start, restate the key concept: income elasticity of demand (YED) measures how quantity demanded responds to changes in income. An elasticity of 1.8 is positive and greater than 1, which has specific implications for the category of goods involved.
Option 1: 'Airline tickets are an inferior good.' Inferior goods have a negative income elasticity, meaning demand falls as income rises. Since 1.8 is positive, this option is incorrect.
Option 2: 'Airline tickets are a necessity.' Necessities typically have positive but smaller income elasticities, generally less than 1, indicating demand grows with income but not proportionally as much. An elasticity of 1.8 suggests a stronger sensitivity than a typical necessity, so this option is unlikely and misleading.
Option 3: 'Airline tickets are a luxury good.' Luxury goods are defined by a positive income elasticity greater than 1, meaning demand increases more than proportionally as income rises. An elasticity of 1.8 fits this characterization, so this option is correct in concept.
Option 4: 'Demand for airline tickets is independent of income.' If demand were independent of income, the income elasticity would be zero. A value of 1.8 contradicts independence, making this option incorrect.
Overall, the positive, high elasticity indicates that airline tickets behave like luxury goods rather than inferior goods, necessities, or income-independent goods. The key distinction hinges on the sign and magnitude of the elasticity and how strongly quantity demanded responds to income changes.

If the income elasticity of demand for airline tickets is 1.8, this implies that:单项选择题

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