Posted in Finance, Accounting and Economics Terms, Total Reads: 595
Definition: Luxury Item
Luxury good, generally not an essential item but is highly demanded within a society for their perceived high value. It is more of a want than a need. The luxury items are also used in reference to person's social status i.e. owning a particular luxury item lifts them to a certain level in society.
Luxury goods are bought either for self worth or for the product’s unique qualities. People tend to buy the luxury goods more when they move up the income bracket. Luxury goods are expensive and are generally bought by people with high disposable income or accumulated wealth than an average consumer. Luxury goods reflect a status symbol for a consumer. The ownership of luxury goods shows that the person has achieved a certain status and position in order to afford them. Thus they are also called positional goods.
Luxury goods are those goods, the consumption of which increases proportionally as and when the income of a person increases. This is completely opposite to what is seen in the case of a necessary good, for which the consumption increases less proportionally than that of the increase in income. This indicates that they have a high income elasticity of demand. On the other hand, this also means that as income decreases, their consumption would also decline.
Example: Brands like Louis Vitton, Gucci, Armani, Chanel, Rolex have a huge line of luxury products.