What is expected regarding the income elasticity of demand for foreign vacation travel compared to food?

The income elasticity of demand measures how the quantity demanded of a good responds to changes in consumer income. A luxury good, such as foreign vacation travel, typically has a higher income elasticity than a necessity good, like food. This means that as income rises, the demand for luxury items tends to increase significantly, while demand for necessities does not increase at the same rate.

For foreign vacation travel, an increase in income often leads consumers to allocate a larger portion of their budget toward leisure and travel experiences, highlighting the good's luxury nature. In contrast, food is a basic necessity; while its demand may increase with income, it does so at a slower rate compared to luxuries. Therefore, the income elasticity of demand for foreign vacation travel is larger than that for food, indicating that consumers are more responsive to income changes for travel than for food.

This understanding is rooted in consumer behavior, where luxuries see a greater relative increase in quantity demanded as incomes rise, reflecting a greater value placed on such experiences in times of increased economic well-being.