State whether the following statements are TRUE and FALSE.
1. Demand for luxuries is elastic.
ANSWER:
TRUE
Luxuries are the goods which are not essential, rather, they are consumed for leisure or comfort purposes. For example, air conditioners, branded garments etc. The demand for such goods is highly responsive to the change in their price. A rise in their price reduces the demand for them and vice-versa. This is because in case the price rises, the consumer can do away with these goods, on the other hand, when the price rises the consumer tends to demand more of such goods to increase his comfort level in living. Thus, such goods have elastic demand.
