The correct answer is C. Luxury item.
Income elasticity of demand is a measure of how much the demand for a good or service changes in response to a change in income. It is calculated by dividing the percentage change in the quantity demanded of a good or service by the percentage change in income.
A good with an income elasticity of demand greater than 1 is a luxury good. This means that the demand for the good increases more than proportionately with income. For example, if a person’s income increases by 10%, and the demand for a luxury good increases by 20%, then the income elasticity of demand for that good is 2.
A good with an income elasticity of demand less than 1 is an inferior good. This means that the demand for the good decreases as income increases. For example, if a person’s income increases by 10%, and the demand for an inferior good decreases by 5%, then the income elasticity of demand for that good is -0.5.
A good with an income elasticity of demand equal to 1 is a necessity. This means that the demand for the good does not change with income. For example, if a person’s income increases by 10%, and the demand for a necessity does not change, then the income elasticity of demand for that good is 1.
In conclusion, if income elasticity for a good is 2, then it is a luxury item.