In economics, a luxury good is a good for which demand increases more than proportionally as income rises, contrast with inferior good and normal good. Luxury goods are said to have high income elasticity of demand: as people become more wealthy, they will buy more and more of the luxury good. This also means, however, that should there be a decline in income its demand will drop. It must be noted, though, that income elasticity of demand is not constant with respect to income, and may change sign at different levels of income. That is to say, a luxury good may become a normal good or even an inferior good at different income levels, e.g. a wealthy person stops buying increasing numbers of luxury cars for his automobile collection to start collecting airplanes (at such an income level, the luxury car would become an inferior good).
Certain manufactured products attain the status of "luxury goods" due to their design, quality, durability or performance that are remarkably superior to the comparable substitutes.
Certain manufactured products attain the status of "luxury goods" due to their design, quality, durability or performance that are remarkably superior to the comparable substitutes.
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Last Updated: Sep 2009
Last Updated: Sep 2009
What are Luxury Goods?
Thus, virtually every category of goods available on the market today includes a subset of similar products whose "luxury" is marked by better-quality components and materials, solid construction, stylish appearance, increased durability, better performance, advanced features and so on. As such, these luxury goods retain or improve the basic functionality for which all items of a given category are originally designed.
There are also goods that are perceived as luxurious by the public simply because they play a role of status symbols as such goods tend to signify the purchasing power of those who acquire them. These items, while may not being any better (in quality, performace, or appearance) than their less expensive substitutes, are purchased with the sole purpose of displaying wealth or income of their owners. These kinds of goods are the objects of a socio-economic phenomenon called conspicuous consumption and commonly include luxury cars, expensive watches and jewelry, designer clothing, yachts, and large residences such as McMansions, urban mansions and country houses.
A luxury brand or prestige brand is a brand for which a majority of its products are luxury goods. It may also include certain brands whose names are associated with luxury, high price, or high quality, though few, if any, of their goods are currently considered luxury goods. The automobile manufacturer Hummer is an example of such a brand, as a Hummer automobile is considered a status symbol, even though none of the vehicles in the Hummer line-up meet the requirements to be classified as a luxury car.
Another market characteristic of luxury goods is their very high sensitivity to economic upturns and downturns, high profit margins as well as prices, and very tightly controlled brands. Other guidelines may apply to certain luxury markets such as the luxury vehicle market.
There are also goods that are perceived as luxurious by the public simply because they play a role of status symbols as such goods tend to signify the purchasing power of those who acquire them. These items, while may not being any better (in quality, performace, or appearance) than their less expensive substitutes, are purchased with the sole purpose of displaying wealth or income of their owners. These kinds of goods are the objects of a socio-economic phenomenon called conspicuous consumption and commonly include luxury cars, expensive watches and jewelry, designer clothing, yachts, and large residences such as McMansions, urban mansions and country houses.
A luxury brand or prestige brand is a brand for which a majority of its products are luxury goods. It may also include certain brands whose names are associated with luxury, high price, or high quality, though few, if any, of their goods are currently considered luxury goods. The automobile manufacturer Hummer is an example of such a brand, as a Hummer automobile is considered a status symbol, even though none of the vehicles in the Hummer line-up meet the requirements to be classified as a luxury car.
Another market characteristic of luxury goods is their very high sensitivity to economic upturns and downturns, high profit margins as well as prices, and very tightly controlled brands. Other guidelines may apply to certain luxury markets such as the luxury vehicle market.
