The more responsive the demand for a good to its price, the higher is the price-elasticity of demand for that good. When:

A. Elasticity of demand is greater than one
B. Demand curve is steeper for elastic goods
C. Necessity goods are highly elastic
D. Elasticity of demand is less than one
E. Luxury goods are highly elastic

Choose the correct answer from the options given below:

A and E only

The correct answer is Option (4) → A and E only

A. Elasticity of demand is greater than one: This is correct. Price elasticity of demand (PED) measures how responsive quantity demanded is to a change in price. If PED is greater than one (elastic demand), it means that a small change in price leads to a relatively larger change in quantity demanded. This indicates high responsiveness of demand to price changes, hence higher price elasticity.

B. Demand curve is steeper for elastic goods: This statement is incorrect. In economics, a steeper demand curve typically indicates inelastic demand (where quantity demanded changes less than proportionately to price changes), not elastic demand. For elastic goods, the demand curve would be flatter because quantity demanded changes more than proportionately to price changes.

C. Necessity goods are highly elastic: This statement is incorrect. Necessity goods tend to have inelastic demand because consumers need them regardless of price changes. If the price of a necessity increases, consumers may reduce quantity demanded slightly, but not significantly. Therefore, necessity goods typically have low price elasticity of demand, not high elasticity.

D. Elasticity of demand is less than one: This statement is incorrect. If elasticity of demand is less than one (inelastic demand), it means that quantity demanded changes proportionately less than price changes. Inelastic demand indicates low responsiveness of quantity demanded to price changes.

E. Luxury goods are highly elastic: This statement is correct. Luxury goods are often associated with elastic demand because consumers can easily postpone or reduce their consumption of luxury goods when prices increase. As a result, quantity demanded changes significantly in response to price changes, indicating high price elasticity of demand for luxury goods.