Question : Assertion (A): Luxury goods often have a high price elasticity of demand.
Reason (R): When the price of luxury goods rises, their demand falls significantly because they are only used for urgent purposes.
Option 1: Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation
of Assertion (A)
Option 2: Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation
of Assertion (A)
Option 3: Assertion (A) is true but Reason (R) is False
Option 4: Assertion (A) is False but Reason (R) is True
Correct Answer: Assertion (A) is true but Reason (R) is False
Solution :
Since the proportionate change in the amount requested for luxury goods is greater than the proportionate change in the price of luxury goods, the elasticity of demand for luxury products is greater than one.
Hence option c is the correct answer.
