Which of the following statements is TRUE?
A) Luxury goods tend to have more elastic demand curves.
B) Goods that are necessities tend to have more elastic demand curves.
C) The elasticity of demand for a particular brand of product equals the elasticity of demand for the product category.
D) Goods with more substitutes tend to have a lower elasticity of demand.

Question

Quizplus · Accepted Answer

Luxury goods tend to have more elastic demand curves because they are often more expensive and consumers are more likely to reduce their consumption if the price increases. In contrast, goods that are necessities (such as food or medical care) have inelastic demand because consumers will continue to purchase them even if the price increases. The elasticity of demand for a particular brand of product may be different from the elasticity of demand for the product category as a whole, depending on factors such as brand loyalty and availability of substitutes. Goods with more substitutes tend to have a higher elasticity of demand, not a lower one.

Which of the Following Statements Is TRUE