What are luxury items in economics?

In economics, a luxury good is an asset whose demand increases more than proportionally as incomes increase. Luxury goods are said to have a high elasticity of demand from the point of view of income. In other words, as people get richer, they will buy more and more luxury items. The list of luxury items includes designer bags, premium watches, high-end cars, jewelry, private jets and haute couture clothing.

Keep in mind that investment in luxury goods is directly proportional to a person's income. Therefore, a significant increase in revenues automatically drives demand for luxury goods. What is the definition of luxury goods? Some people think that these luxury products are high-end products. Sometimes this is the case, but not all high-end products fall into this category.

Luxury goods, also called superior goods, are products with demand that is directly related to consumer income in an exponential way. The dependence of individual consumers on luxury goods, as well as on the economy, is largely defined by income with respect to consumer taste and preferences. Things like high-quality service, luxurious packaging, and an elegant in-store environment provide an enriching experience. Luxury items are distinguished from necessary or ordinary items by measures related to consequences; therefore, the luxury of any good is not determined by its characteristics, but by people's reaction (changes in demand) to exogenous stimuli.

Extraordinary places will be the development factor that can be achieved by allowing the conversion of items from the mass market to the luxury market. Market demand for a basic necessity item increases with the increase in a person's income, but less compared to the demand for a luxury item. Looking more closely at the trend, the middle-income group that earned a full income even during the pandemic was reluctant to spend it on luxuries. A luxury item is an expensive product considered elite and most appreciated in a community or culture.

While workers were able to receive partial wages in many countries, it is most likely that a person would spend their partial salary on basic needs and not on luxuries. For this reason, luxury brands are preparing with virtual versions of their items to seize the opportunity.

Matilda Nguyen
Matilda Nguyen

I'm a writer experienced in writing about current events and improving home building plans, interior design, custom home building, home improvement advice in Alexandria NSW 2015.