ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -In economics, a luxury good is a good for which demand increases more than proportionally as income rises. Luxury goods are said to have high income elasticity of demand. In other words, as people become wealthier, they will buy more and more of the luxury good.

Detailed explanation-2: -Luxury goods have an income elasticity of demand greater than 1, which means its consumptions increase more than income (Costa-Font et al. 2011). Income elasticity reflects the responsiveness of the demand for a consumer’s income changes.

Detailed explanation-3: -Key Takeaways. A Giffen good is a low-income, non-luxury product for which demand increases as the price increases and vice versa. A Giffen good has an upward-sloping demand curve which is contrary to the fundamental laws of demand which are based on a downward sloping demand curve.

Detailed explanation-4: -When a good or service is a luxury or a comfort good, the demand is highly price-elastic when compared to a necessary good. Conversely, the demand for an essential good, such as food, is generally price-inelastic because consumers still buy food even if the price changes.

Detailed explanation-5: -A normal good is a good that experiences an increase in demand due to an increase in a consumer’s income. Normal goods have a positive correlation between income and demand. Examples of normal goods include food, clothing, and household appliances.