When we talk about elasticity in microeconomics, especially about essential and luxury goods, we notice some interesting behaviors in how people buy things.

Essential Goods: These are things that people really need to live, like food, water, and healthcare. The demand for these goods is inelastic. This means that even if prices go up, people will still buy them because they need them. For example, if the price of bread goes up by 20%, people might only buy about 5% less. We can think of it like this: the price doesn’t change much how much people buy these items.

Luxury Goods: On the other hand, luxury goods—like fancy handbags or expensive cars—have elastic demand. This means that price changes can really affect how much people want to buy them. If the price of a luxury item increases by 20%, people might buy 30% less because these are not things they need. So, the demand for these items changes more with price.

In summary, essential goods are necessary for life, and people will keep buying them even if prices rise a little. Luxury goods, however, are much more affected by price changes, leading to people buying them less when prices go up.