When you raise the luxury rate, the people get happy. After they begin celebrating, you can lower the luxury rate a bit - Basically, the celebration causes more arrows to be produced; It is against this new total arrows that the lowered luxury rate is calculated. So, to make up some numbers for an example,
City A produces 5 arrows with 5 citizens. At 10% luxury, this gives zero goblets. Nobody is cheered by this. You raise the luxury to 80% - 4 goblets result, making 3 citizens happy (with temple, etc). They celebrate!
As a result of celebration, those 5 citizens grow to 6 and produce 12 arrows. You only need to keep 4 happy to prolong the celebration, which you can do by setting luxuries to 50%. At size 7, they produce 14 arrows - you can lower to luxury rate to 40% to keep the celebration going.
The numbers are fishy in this example, but that is how it works.
City A produces 5 arrows with 5 citizens. At 10% luxury, this gives zero goblets. Nobody is cheered by this. You raise the luxury to 80% - 4 goblets result, making 3 citizens happy (with temple, etc). They celebrate!
As a result of celebration, those 5 citizens grow to 6 and produce 12 arrows. You only need to keep 4 happy to prolong the celebration, which you can do by setting luxuries to 50%. At size 7, they produce 14 arrows - you can lower to luxury rate to 40% to keep the celebration going.
The numbers are fishy in this example, but that is how it works.
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