One way to define luxuries (as opposed to necessities)is to say that luxuries are those goods
A) purchased by consumers with high incomes.
B) with high prices.
C) with high income elasticities of demand.
D) that are perfectly price inelastic.
E) for which substitutes are not readily available.

Question

Quizplus · Accepted Answer

Luxuries are items for which demand is highly elastic with respect to changes in income. This means that as consumers' incomes increase, they will spend a larger proportion of their income on luxury goods. Conversely, as incomes decrease, consumers will cut back on luxury purchases. Therefore, high income elasticity of demand is characteristic of luxury goods.

One Way to Define Luxuries (As Opposed to Necessities)is to Say