DO LUXURY GOODS FOLLOW THE LAW OF DEMAND?

QUESTIONS & ANS.

1. Do luxury goods follow the Law of Demand?

A. Yes, they do. Law of Demand states that if more people want to buy something, given a
limited supply, the price of that thing will be bid higher -- and vice-versa.
B. No, Luxury goods do not follow the Law of Demand. It only applies to necessities, not
luxuries.
C. Is only an assumption that cannot be tested.
D. All of the above

2. Can the Law of Demand be broken because of luxury goods?

A. No because it cannot affect the prices in ways predicted by the Law of Demand.
B. Yes, in certain cases an increase in demand does not affect prices in ways predicted by the
Law of Demand. For instance, so- called Veblen goods and Giffen goods.
C. The shape and position of demand curve cannot be impacted by willingness of people to
spend more.
D. All of the above

3. If a good is considered to be a luxury good, does it mean that the Law of Demand does
not hold?
A. Yes, since luxury goods are associated with conspicuous consumption, high-income
individuals purchase more of these goods as their prices rise.
B. No, it only means that its income elasticity of demand is greater than 1.0, so the Law of
Demand still holds.
C. Yes, the Law of Demand is only relevant for normal goods.
D. No, the Law of Demand is an immutable Law of nature, like the Law of gravity, which can
never be violated.

4. what are considered luxury goods?

A. Is one in which demand grows more and faster than an increase of the income of a potential
buyer.
B. It stands in opposition to "necessity" goods, for which demand grows much slower than
income.
C. Luxury goods are often the highest quality.
D. All of the above

5. What justifies for the high price of luxury products?

A. Emotional Value drivers that represent the product determines the price premium that can be
charged like brand, uniqueness or prestige.
B. Functional Value drivers that represent the core of a product and are most important in terms
of pricing.
C. Option A & B
D. Because of expenses made.

6. What do you think is the Factors Affecting Demand?

A. Rising incomes tend to increase demand for normal economic goods, as people are willing to
spend more.
B. The availability of close substitute products that compete with a given economic good will
tend to reduce demand for that good, since they can satisfy the same kinds of consumer wants
and needs.
C. future expectations, changes in background environmental conditions or change in the actual
or perceived quality of a good can change the demand curve.
D. All of the above

7. What are some exceptions to the Law of demand?

A. Giffen goods & Veblen goods
B. Change in Income
C. Possible price changes and essential goods and services
D. All of the above
8. Which of the following is a Veblen Good?
A. Potatoes
B. Salt
C. Luxury Car
D. None of the above
Ans: The correct answer is C. A luxury car is a Veblen good. They are expensive products whose
value increases if the price is higher. More expensive the product, the higher its value.

9. Which of the following is a Giffen Goods?

A. Potato
B. Bread
C. Rice
D. All of the above

10. Which Among the following is a Necessary Good?

A. Salt
B. Gold
C. Car
D. Mobile
Ans: The correct answer is A. Salt is a regular use commodity in households. Even if the price
increases, the demand for salt won't degrade. This theory comes as the exact opposite of the law
of Demand. For all the necessary goods, the demand stays the same, even in the price increment.
Exceptions to the law of demand examples include both essential and luxury items.