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The luxury goods like jewellery and fancy articles will have
- a)low income elasticity of demand
- b)high income elasticity of demand
- c)zero income elasticity of demand
- d)none of the above
Correct answer is option 'B'. Can you explain this answer?
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The luxury goods like jewellery and fancy articles will havea)low inco...
High Income Elasticity of Demand for Luxury Goods
Definition of Income Elasticity of Demand
Income elasticity of demand measures the responsiveness of demand for a product to a change in consumer income. It is calculated as the percentage change in quantity demanded divided by the percentage change in income.
Explanation of Answer
Luxury goods like jewellery and fancy articles are considered to be high-end products that are purchased by consumers who have high disposable incomes. As a result, these goods have a high income elasticity of demand. When consumers have more disposable income, they are more likely to purchase luxury goods. Conversely, when their disposable income decreases, they are less likely to purchase these goods.
Factors that Determine Income Elasticity of Demand
There are several factors that determine the income elasticity of demand for a product, including:
1. Price of the product
2. Availability of substitutes
3. Necessity of the product
4. Consumer preferences
5. Consumer income distribution
Conclusion
Overall, luxury goods like jewellery and fancy articles have a high income elasticity of demand because they are considered to be high-end products that are purchased by consumers with high disposable incomes. This means that as consumer income increases, there is a greater increase in demand for these goods. However, if consumer income decreases, there is likely to be a decrease in demand for these goods.
Definition of Income Elasticity of Demand
Income elasticity of demand measures the responsiveness of demand for a product to a change in consumer income. It is calculated as the percentage change in quantity demanded divided by the percentage change in income.
Explanation of Answer
Luxury goods like jewellery and fancy articles are considered to be high-end products that are purchased by consumers who have high disposable incomes. As a result, these goods have a high income elasticity of demand. When consumers have more disposable income, they are more likely to purchase luxury goods. Conversely, when their disposable income decreases, they are less likely to purchase these goods.
Factors that Determine Income Elasticity of Demand
There are several factors that determine the income elasticity of demand for a product, including:
1. Price of the product
2. Availability of substitutes
3. Necessity of the product
4. Consumer preferences
5. Consumer income distribution
Conclusion
Overall, luxury goods like jewellery and fancy articles have a high income elasticity of demand because they are considered to be high-end products that are purchased by consumers with high disposable incomes. This means that as consumer income increases, there is a greater increase in demand for these goods. However, if consumer income decreases, there is likely to be a decrease in demand for these goods.
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The luxury goods like jewellery and fancy articles will havea)low income elasticity of demandb)high income elasticity of demandc)zero income elasticity of demandd)none of the aboveCorrect answer is option 'B'. Can you explain this answer?
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