If income is doubled and all prices are doubled, then the demand for luxury goods will more than double.Question 21Select one:TrueFalse

The statement is False.

Explanation:

When income doubles and all prices also double, the purchasing power remains the same. This means that, although consumers have more money, the cost of goods has also increased proportionally.

Further Analysis:

• Income Effect: Doubling income implies that consumers can afford to buy more. However, this additional purchasing capability is negated by the fact that prices have also doubled.
• Demand for Luxury Goods: Generally, luxury goods are considered to have a greater income elasticity of demand; however, if all prices have doubled, the real purchasing power remains unchanged. Thus, the demand for luxury goods will not necessarily increase more than proportionally (more than double).

Conclusion:

The assertion that demand will more than double under these circumstances is not accurate. Therefore, the correct answer is False.