Solution

The extent of responsiveness of demand with change in the price is not always the same. The demand for a product can be elastic or inelastic, depending on the rate of change in the demand with respect to change in price of a product. Elastic demand is the one when the response of demand is greater with a small proportionate change in the price. On the other hand, inelastic demand is the one when there is relatively a less change in the demand with a greater change in the price. Therefore, the demand for commodities having a large number of close substitutes is more elastic than the commodities having a smaller number of substitutes because whenever there is a change in prices of commodities having close substitutes there will be drastic change in the demand of that commodity. Hence, statement 1 is incorrect. Luxury items Luxury items have a highly elastic demand. Since these items are not necessity therefore, change in prices of these items lead to drastic change in the demands of these items. Hence, statement 2 is correct. The commodities whose consumption cannot easily be postponed have less elastic demand. Since these commodities belong to the necessity class of goods e.g., flour, salt, sugar etc. Therefore, irrespective of change in prices of these goods, demand of these commodities does not get affected too much. Hence, statement 3 is correct. Therefore, B is the right answer.