Final answer:
Products with many close substitutes have elastic demand, while luxury goods have inelastic demand.
Step-by-step explanation:
Demand elasticity measures how responsive the quantity demanded of a good or service is to changes in price. If demand is elastic, a small price change leads to a proportionally larger change in quantity demanded; if inelastic, the change in quantity is proportionally smaller. It is crucial for pricing and revenue strategies. In economics, the demand for a product can be classified as elastic or inelastic based on its substitutability and whether it is considered a luxury good.
In addition to this, products with many close substitutes tend to have elastic demand because consumers can easily find alternatives when the price increases. On the other hand, products considered to be luxury goods tend to have inelastic demand since they are not essential and have fewer substitutes.