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

Question

Quizplus · Accepted Answer

Luxury items that take up a significant portion of the household budget tend to have relatively price-elastic demand. This means that consumers are more sensitive to price changes, and demand can vary significantly with small changes in price, as these goods are not considered essential and can be foregone or substituted with cheaper alternatives.

If a Good Is a Luxury Item That Looms Large