With regard to price elasticity, in general, demand for a luxury good is likely to be ..........
Answer & explanation
Correct answer: option 4
The correct answer is Option (4) → Elastic
Luxury goods are non-essential items — consumers can easily postpone or reduce their purchase when prices rise.
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A small change in price causes a larger change in quantity demanded, showing high responsiveness of demand to price.
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Therefore, the price elasticity of demand for luxury goods is greater than 1, i.e., elastic.
In contrast, necessities (like food, medicines) have inelastic demand, since people must buy them even if prices increase.