Question

For Amazon What kind of income elasticity the product(s) of the company face

Answer 1

Amazon sells a wide variety of goods. Some of these goods may be normal goods, some luxury goods and some may even be inferior goods. The income elasticity of the inferior goods is less than 0, as with an increase in income, the demand for these goods fall. For normal goods, the income elasticity is greater than 0 and less than 1. So, for normal goods, the demand increases with an increase in income; however, the % change in demand is smaller than the % change in income. For luxury goods, the income elasticity is greater than 1. So, for luxury goods, the demand increases with an increase in income and the % change in demand is higher than the % change in income.