Question

he income elasticity of demand for caviar tends to be a. high because caviar is relatively expensive. b. low because caviar is packaged in small containers. c. high because buyers generally feel that they can do without it. d. low because it is almost always in short supply.

Answer 1

Answer:

c. high because buyers generally feel that they can do without it

Explanation:

Income elasticity of demand measures the degree of responsiveness of quantity demanded of a product with respect to the change in the income of the consumer, keeping other factors affecting demand as constant.

It is represented as

= $\frac{percent\ change\ in\ quantity\ demanded}{percent\ change\ in\ income}$

A High income elasticity of demand conveys, a rise in the income of the consumer is accompanied by a higher increase in the quantity demanded. Similarly, a fall in the income of the consumer is accompanied by a greater fall in the quantity demanded.

Caviar fish is expensive and would be usually characterized as a luxury. Thus, if the income of the consumer falls, he will end up forgoing relatively higher quantity of caviar since the consumer believe it to be easier to do away without it.