Question

The demand for regular milk which many consumers view as a necessity, will be more elastic than the demand for chocolate milk, which many consumers view as a luxury.

A.) True

B.) False

Answer 1

The statement that “The demand for regular milk which many consumers view as a necessity, will be more elastic than the demand for chocolate milk, which many consumers view as a luxury,” is False. This is because the demand for a necessity good is comparatively inelastic meaning change in the price of the good results in very small change in the demand. This happens because people will have to consume the necessity good so price change will have little impact of its demand. On the other hand, the demand for a luxury good is comparatively elastic.