GK
BUSINESS ECONOMICS
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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fewer customers and less productivity.
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more customers and more productivity.
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fewer customers and more productivity.
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more customers and less productivity.
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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: -A luxury good means an increase in income causes a bigger percentage increase in demand. It means that the income elasticity of demand is greater than one. For example, HD TV’s would be a luxury good. When income rises, people spend a higher percentage of their income on the luxury good.
Detailed explanation-3: -For example, luxury goods have a high price elasticity of demand because they are sensitive to price changes. 1 Suppose the prices of LED televisions decrease in price by 50%. The demand increases because they are more affordable to those who were unable to purchase them before.
Detailed explanation-4: -As we can see on the demand graph, there is an inverse relationship between price and quantity demanded. Economists call this the Law of Demand. If the price goes up, the quantity demanded goes down (but demand itself stays the same). If the price decreases, quantity demanded increases.