Economics Elasticity Of Demand Questions Medium
The price elasticity of demand for a luxury good is typically elastic, meaning that a change in price will have a relatively large impact on the quantity demanded. Luxury goods are non-essential items that are typically purchased by consumers with higher incomes, who have more flexibility in their purchasing decisions. As a result, when the price of a luxury good increases, consumers are more likely to reduce their quantity demanded or switch to alternative products. Conversely, when the price of a luxury good decreases, consumers may be more willing to purchase more of the good or upgrade to higher-end versions. Therefore, the demand for luxury goods is generally more responsive to changes in price compared to essential goods, resulting in a higher price elasticity of demand.