Which of the following goods would you expect to have the largest income elasticity of demand?

The correct answer is C. Stereo equipment.

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. Goods with a high income elasticity of demand are called luxury goods, while goods with a low income elasticity of demand are called necessities.

Stereo equipment is a luxury good because it is a non-essential item that people are more likely to buy when they have more money to spend. When people’s incomes go up, they are more likely to spend money on luxury goods like stereo equipment. This is because they have more money to spare and

448s170.8 0 213.4-11.5c23.5-6.3 42-24.2 48.3-47.8 11.4-42.9 11.4-132.3 11.4-132.3s0-89.4-11.4-132.3zm-317.5 213.5V175.2l142.7 81.2-142.7 81.2z"/> Subscribe on YouTube