Afirm knows that mike’s income elasticity of demand for hair ties is 5 while for sally it is 0.2. a firm can reason that a hair tie is a(n) good for mike while it is a(n) good for sally.

1) Luxury

2) Necessity

Explanation:

1)The hair tie is a luxury good for Mike because Mike has a income elasticity of 5 which means that if mike's income decreases 1% his demand for the good decreases 5%, which shows that his demand for this good is highly sensitive to his income which is a characteristic of luxury goods, as you only buy luxury goods when your income increases.

2) It is a necessity for Sally because her income elasticity to the good is 0.2 which means every 1% change in income changes her demand by just 0.2%, which shows demand is not very sensitive to income and the quantity she buys them in dont rely much on her income, which is a sign of a necessity, you buy a certain amount of necessities regardless of your income.

answer; a large down payment,a longer term loan, would result in a lower monthly payment;