If a good is a luxury item that looms large in the household budget, then demand will tend to:
A) be more price-elastic.
B) be less price-elastic.
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 more price-elastic demand because consumers are more sensitive to price changes and may reduce consumption if prices rise.

If a Good Is a Luxury Item That Looms Large