Microeconomic Project Luxury vs. Necessity Good Essay

SCHOOL OF BUSINESS Luxury Good VS. Necessity Good Prepared by: Leila Zbib 10830225 Ali El Masri 10831682 Rodina Kanso 10930163 Mazen Al Khansa 10930988 Submitted to: Dr. Ghina Tabash A project submitted in Partial Fulfillment of the Requirement for the Course: BECO210: Introduction to MicroEconomics Beirut: MWF 8:00 – 8:50 AM Spring 2010 List of Contents: Cover Page……………………………………………………………………………. Page 1 List of Contents……………………………………………………………………….. Page 2 Acknowledgment……………………………………………………………………… Page 3

Dedication……………………………………………………………………………….. Page 3 Luxury Good VS. Necessity Good……………………………………………………… Page 4 Gold VS. Bread……………………………………………………………………….. Page 5 Sample…………………………………………………………………………………. Page 5 Questionnaire…………………………………………………………………………. Page 6 Tables………………………………………………………………………………….. Page 7, 8 Graphs…………………………………………………………………………………Page 9,10 Explanation……………………………………………………………………………Page 11 Acknowledgement: This would be the Appropriate Moment to thank all of the LIU’s constituencies for their Professional Mission and Expertise.

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In a special way, I would like to express a Sign of Gratitude and Appreciation to Dr. Ghina Tabash who helped me Accomplish this Scientific Inquiry. Dedication: It is our Intention at this present time of our College Undergraduate Education to dedicate this Scientific Investigation to all the members of our Beloved Family. Luxury Good VS. Necessity Good In Economics, a Luxury Good is a Good for which its Demand increases more proportionally as Income rises, plus its Demand will increase as long as its price keeps on decreasing.

Luxury Goods are said to have High Price Elasticity of Demand (=infinity) plus High Income Elasticity of Demand (>1). The more the person becomes wealthier; he will buy more of this Good. So when there is a decline in Income, the Demand will drop. Income Elasticity of Demand is not constant with respect to Income and a Luxury Good might become an Inferior/Normal Good at different Income levels. For example a wealthy person stops on buying Luxury motorcycles for his automobile collection and start on collecting cars. Luxury Automobiles would ecome an Inferior good in accordance to the wealthy person. In contrast, a Necessity Good is a type of Normal Good. It is a Good that we can’t live without and won’t likely to cut back on even when times are tough such as Bread and Water. It is a Good for which its Demand will stay the same even when its Price increases. As the Income increases the Demand of a Necessity Good will stays the same or even increase. It has a lower Price Elasticity of Demand than the Luxury Good (=0) and also has a lower Income Elasticity of Demand (

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