Even though toothpaste isn't a very exciting product for most of us, it probably isn't inferior. Most people probably don't use less toothpaste when income increases. Therefore, should still be positive for toothpaste, though probably small.

   On the other hand, cars, houses, vacations, boats, fine dining, etc. are the sorts of goods that consumers are more likely to purchase significantly more of as income rises. If so, we might expect income elasticity to be positive and relatively large for such goods.

   As it turns out, we can classify goods into three categories based on income elasticity...

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