Studies Show That the Income Elasticity of Demand for Wine

question 212

Multiple Choice

Studies show that the income elasticity of demand for wine is 5.03 and the income elasticity of demand for spirits is 1.21.This indicates that

• A)wine and spirits are luxury goods.
• B)wine is a luxury good and spirits are inferior goods.
• C)wine and spirits are highly price elastic.
• D)wine is a luxury good and spirits are necessities.

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Definitions:

Southwestern New Mexico

A region in the southwestern part of the state of New Mexico, characterized by its beautiful desert landscapes and rich cultural history.

Real GDP

The calculation of a nation's total economic output accounting for price level changes over time, to represent the real value of all produced goods and services using stable prices.

Annual Growth Rate

The percentage change in the value of a particular economic variable over the course of a year, indicative of the variable's expansion or contraction over time.

Income Rankings

A hierarchy or classification of incomes, from the lowest to the highest.