The demand for which of the following is usually price elastic?
Answer & explanation
Correct answer: option 4
The correct answer is Option (4) → Luxury goods
Demand for luxuries changes a lot when their prices change, so it is usually elastic. People can postpone or give up a luxury when it becomes dearer.
Option (1) A good whose demand curve is vertical — Incorrect. A vertical demand curve is perfectly inelastic: demand does not change at all.
Option (2) Essential goods — Incorrect. Essential goods are needed whatever the price, so their demand is usually inelastic.
Option (3) Goods with no close substitutes — Incorrect. Without close substitutes, buyers cannot switch, so demand is likely to be inelastic.
Option (4) Luxury goods — Correct. Their demand responds strongly to price.
NCERT (2026-27): “2.6.2 Factors Determining Price Elasticity of Demand for a Good The price elasticity of demand for a good depends on the nature of the good and the availability of close substitutes of the good. Consider, for example, necessities like food. Such goods are essential for life and the demands for such goods do not change much in response to changes in their prices. Demand for food does not change much even if food prices go up. On the other hand, demand for luxuries can be very responsive to price changes. In general, demand for a necessity is likely to be price inelastic while demand for a luxury good is likely to be price elastic. … On the other hand, if close substitutes are not available easily, the demand for a good is likely to be inelastic.” “Constant Elasticity Demand Curve … Therefore, a vertical demand curve is perfectly inelastic.” |