What good is most likely to have an income elasticity of demand equal to 8?

a. college coursework

b. a doctor's visit

c. a five-star hotel

d. toilet paper

e. used clothing

• The correct answer is: c. a five-star hotel

For normal goods, the income elasticity of demand is always positive, indicating that consumers demand more of a normal good when their income increases and vice versa. For a normal good which is a luxury good, the income elasticity of demand is greater than one meaning that consumers spend a larger proportion of their income on the consumption of a luxury good as their income increases.