Question

What type of demand characterizes necessity goods compared to luxury goods?

Options

• Necessities have elastic demand, while luxuries have inelastic demand.

• Necessities have inelastic demand, while luxuries have elastic demand.

• Both necessities and luxuries have the same elasticity.

• Necessities are always inelastic, and luxuries are always elastic.

Answer 1

Necessities have inelastic demand, while luxuries have elastic demand.

Explanation:

Necessities are essential, so demand remains inelastic even with price changes. Luxuries are optional, making their demand elastic.