GENERAL KNOWLEDGE

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: -A luxury good or service is one whose income elasticity equals or exceeds unity. A necessity is one whose income elasticity is greater than zero and less than unity. Luxuries and necessities can also be defined in terms of their share of a typical budget.

Detailed explanation-3: -Demand for luxuries is highly elastic because if the price of a luxury commodity increases the quantity demanded will be not be same, the change in quantity demanded will be more than the change in price and vice versa.

Detailed explanation-4: -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.