GENERAL KNOWLEDGE

Detailed explanation-1: -For example, luxury goods have a high price elasticity of demand because they are sensitive to price changes.

Detailed explanation-2: -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. Luxury goods are highly sensitive to economic upturns and downturns; therefore, the state of the economy will often shape consumer spending on luxury goods.

Detailed explanation-3: -For luxury goods, the income elasticity of demand is greater than 1. For inferior goods, the income elasticity of demand is negative. The price elasticity of supply is positive. The closer the industry (firm) is to full capacity, the lower the price elasticity of supply.