Final answer:
The income elasticity of demand for luxury items such as diamonds is usually greater than 1, indicating an elastic demand that responds significantly to changes in income.
Step-by-step explanation:
The income elasticity of demand for luxury items like diamonds is indeed typically large (greater than 1). This is because such goods are considered to be luxury items, which means demand for them increases more than proportionally as income rises. When people have more income, they are more likely to spend a larger percentage of it on non-essential items that are seen as status symbols or indulgences, like diamonds. Therefore, this makes the demand for luxury items very responsive to changes in income, a concept known as elastic demand.