If a good is a luxury item that looms large in the household budget, then the price elasticity of demand will tend to be:
A) more price elastic.
B) less price elastic.
C) equal to -1.
D) the same as that of a good that is a necessity.

Question

Quizplus · Accepted Answer

Luxury items are usually non-essential and have substitutes, making consumers more likely to be responsive to changes in price. Therefore, the price elasticity of demand for luxury goods tends to be more price elastic.

If a Good Is a Luxury Item That Looms Large