Question

1. Luxuries goods have generally elastic demand.
2. Goods whose close substitutes are available have inelastic demand.

Options

• Statement (i) is false and statement (ii) is true

• Statement (i) is true and statement (ii) is false

• Both (i) and (ii) are false

• Both (i) and (ii) are true

Answer 1

Statement (i) is true and statement (ii) is false

Explanation:

• Statement (i) is true because luxury goods generally have elastic demand, meaning that a change in price leads to a relatively larger change in the quantity demanded.
• Statement (ii) is false because goods with close substitutes typically have elastic demand, as consumers can easily switch to a substitute if the price of the good increases.