Which of the following goods (commodities) have positive elasticities?
A. Necessities
B. Substitutes
C. Luxury goods
D. Complementary goods
E. Inferior goods
Choose the correct answer from the options given below:

Correct option is A

Positive elasticity means the demand for a good increases when the related factor (price, income, or price of related goods) increases.

• Necessities (A) have positive income elasticity, meaning demand increases as income rises, though less than proportionally.

• Substitutes (B) have positive cross-price elasticity; demand for one increases if the price of the other rises.

• Luxury goods (C) have high positive income elasticity, meaning demand rises more than proportionally with income.

Hence, necessities, substitutes, and luxury goods all have positive elasticities.

Information Booster:

Necessities, despite their essential nature, respond modestly to income changes because people need a baseline amount regardless of income fluctuations. Substitutes help maintain market balance by allowing consumers to switch between similar goods based on relative prices, which can intensify competition among producers. Luxury goods are highly sensitive to economic cycles; their demand expands significantly as consumers' disposable incomes increase, reflecting their status as non-essential but desirable items. Together, these goods highlight how elasticity influences pricing strategies, marketing efforts, and policy-making in an economy.

Additional Knowledge:

• Complementary goods (D): Have negative cross-price elasticity since demand for one falls if the price of its complement rises.

• Inferior goods (E): Have negative income elasticity; demand decreases as income rises, so elasticity is negative.