Question

The income of a household rises by 20 per cent, the demand for computer rises by 50%, this means computer is a/an:
(a) Inferior good
(b) Luxury good
(c) Necessity
(d) None of the above

Answer 1

b) Luxury good

Explanation:

A luxury good is defined as the one in which demand rises more and faster than an increase of the revenue of a potential buyer. These goods are not necessary for living. It's demand increases when an individual's income increases. As we can see in the given question the income of household rises due to which the demand for computer also rises. Luxury goods are relative as it depends upon many factors like region, time, culture, and economic. Some characteristics of Luxury goods are:

- Not necessary for existence

- very expensive

- Good quality