Changes

4.) The term “necessity” is given to a good that has a price elasticity of less than one because people need to have this item to help them live. These items will sell at almost any price because they are so important. Some necessities on the market are gas, food, and clean water. The term “luxury” is given to a good that has a price elasticity of more than one because these items are not needed to help us survive. When the price increases on a luxury item, the demand will decrease. Some luxuries on the market are iPods, sports cars, and video games.

4.) The term “necessity” is given to a good that has a price elasticity of less than one because people need to have this item to help them live. These items will sell at almost any price because they are so important. Some necessities on the market are gas, food, and clean water. The term “luxury” is given to a good that has a price elasticity of more than one because these items are not needed to help us survive. When the price increases on a luxury item, the demand will decrease. Some luxuries on the market are iPods, sports cars, and video games.

:Excellent, but note that the demand decreases for both necessities and luxuries, because both comply with the Law of Demand.  The demand decreases MORE for elastic goods (luxuries) due to an increase in price.

:Excellent, but note that the demand decreases for both necessities and luxuries, because both comply with the Law of Demand.  The demand decreases MORE for elastic goods (luxuries) due to an increase in price.  Also, there was a mistake in the question so please see the model answers.

5.) A substitute for french fries is potato chips. A complement for french fries is a soft drink.

5.) A substitute for french fries is potato chips. A complement for french fries is a soft drink.