Industries like the airlines with a high-income elasticity of demand experience tremendous volatility when income increases and decreases

Question

True of false if false need explanation

Answer 1

True. Income elasticity of demand is the response to a change in the purchase of a good based on a change in income. Airline travel is a luxury, elastic good. If income elasticity of demand is high (which it is for traveling in an airplane), this means that a small change in income will result in a larger change in quantity demanded for airline travel. Items that are affordable necessities (e.g. toothpaste, gasoline, bottled water) tend to have less volatility when income changes.