When the price of a good increased by 2 percent, the quantity demanded of it decreased 10 percent. Does this good have close substitutes or poor substitutes? Is this good more likely to be a necessity or a luxury and to be narrowly or broadly defined? Most likely, this good __ and __ . A. is a luxury; has good substitutes B. is narrowly defined ; is a necessity C. is a necessity;is broadly defined D. is a luxury;has poor substitutes E. has good substitutes is a necessity

The correct answer is D. is a luxury; has poor substitutes.<br /><br />Explanation:<br />When the price of a good increases by 2 percent and the quantity demanded decreases by 10 percent, it indicates that the good is elastic in demand. Elasticity of demand measures the responsiveness of quantity demanded to changes in price. A good with elastic demand has a relatively large change in quantity demanded for a small change in price.<br /><br />Goods with elastic demand tend to be luxuries rather than necessities. Luxuries are non-essential goods that consumers can easily forego if their prices increase. Consumers are more likely to reduce their consumption of luxuries when prices rise, resulting in a larger decrease in quantity demanded.<br /><br />Additionally, the fact that the quantity demanded decreased significantly (10 percent) suggests that the good has poor substitutes. If there were good substitutes available, the decrease in quantity demanded would not be as large. Consumers would have the option to switch to the substitutes, which would mitigate the decrease in quantity demanded.<br /><br />Therefore, the good is most likely to be a luxury and have poor substitutes, making option D the correct answer.