ECONOMICS
ELASTICITY OF DEMAND
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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income elasticity of demand is greater
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income elasticity of demand is lower
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Either A or B
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None of the above
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Detailed explanation-1: -Luxury goods represent normal goods associated with income elasticities of demand greater than one. Consumers will buy proportionately more of a particular luxury good compared to a percentage change in their income.
Detailed explanation-2: -If a good is a luxury, its income elasticity of demand is Positive and greater than 1. If income elasticity of demand of a commodity is less than 1, it is a necessity good. If the elasticity of demand is greater than 1, it is a luxury good or a superior good.
Detailed explanation-3: -If the price elasticity of the demand for chocolates is greater than one, then the manufacturers of chocolates can increase their total revenue by raising the price of chocolate.
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.