Question

The market for diamond rings, meaning all types and brands of diamond rings, has a demand that is elastic with respect to price since diamond rings are not a necessity. Tiffany is a particular brand of diamond rings. It is quite likely true that the demand for diamond rings from Tiffany ____ the demand for diamond rings. A. is more elastic than B. is just as elastic C. might be more or less elastic than D. is less elastic than

Answer 1

Answer:

A. is more elastic than general diamond rings

Explanation:

Typically, luxury items are less elastic than necessities (when prices go up, people still buy necessities but are less likely to spend more on luxury goods). However, we are not comparing luxury vs. necessity. We are comparing a high-end name-brand ring like Tiffany's vs other diamond rings. Because Tiffany's is such a well know and sought after brand, people will likely be willing to pay a little more for it because of the brand recognition and prestige.