If cheesecake is considered a luxury good, what is likely to happen when your income increases?

When cheesecake is classified as a luxury good, it implies that demand for cheesecake increases as consumer income rises. This reflects the fundamental characteristic of luxury goods, where higher incomes lead to increased consumption.

As your income increases, you will likely find yourself willing and able to buy more cheesecake because you can afford it more easily. Additionally, with greater income, you might be inclined to allocate a larger portion of your budget to premium or indulgent options, reinforcing the idea that you would spend more on cheesecake not solely in quantity but also potentially in spending per item—upgrading to more expensive varieties or larger quantities.

In contrast, options suggesting that you would buy less cheesecake or decrease spending contradict the nature of luxury goods, which are not essential and are often seen as treats or indulgences. The suggestion of no change in purchasing behavior overlooks the fact that a significant increase in income typically influences consumer behavior significantly, especially regarding non-essential goods such as luxury food items. Thus, with higher income, the likelihood of both increased quantity purchased and heightened spending share on cheesecake captures the essence of the relationship between income and luxury goods.