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necessity


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A good or service whose consumption by an individual, at a given price, rises less than in proportion to increases in their income. The income elasticity of demand for a necessity is less than one. Necessities are thus goods on which poorer people spend a larger proportion of their incomes than richer people. A necessity is contrasted with a luxury, which is a good or service whose consumption rises more than in proportion to increases in income. See also Engel curve.

Subjects: Economics.


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