ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -A typical example of such a type of product is margarine, which is much cheaper than butter. Furthermore, luxury goods are a type of normal good associated with income elasticities of demand greater than one. Consumers will buy proportionately more of a particular good compared to a percentage change in their income.

Detailed explanation-2: -The income elasticity of demand for leisure is 1, since both goods increase at the same rate as income. Since the elasticity is exactly 1, the good is normal; but neither a luxury nor a necessary good.

Detailed explanation-3: -The demand for jewelry tends to have highest income elasticity of demand because the individuals will only increase the demand for jewelry when their income increases.

Detailed explanation-4: -If the income elasticity of demand is greater than 1, the good or service is considered a luxury and income elastic. A good or service that has an income elasticity of demand between zero and 1 is considered a normal good and income inelastic.