A luxury item is not necessary for living, but it is considered highly desirable in a culture or society. Luxury goods being expensive, the wealthy are disproportionate consumers of luxury goods. In fact, the less a person is wealthy, the more a high percentage of his income must be spent on the goods he needs to live. Because of this, luxury goods are often examples of remarkable consumption, that is to say the purchase of products mainly or solely to show its wealth.
Breaking the luxury item
Certain luxury items may be subject to a specific tax or “luxury tax”. Large or expensive pleasure craft or automobiles may be subject to federal tax. For example, the United States levied a luxury tax on certain automobiles in the 1990s, but ended the tax in 2003. Luxury taxes are considered progressive because they generally only affect people with wealth or high net income.
Luxury items have an income elasticity of demand, which means that when people get richer, they will buy more of these products. Similarly, in the event of a drop in income, the demand for luxury goods will decrease.
Luxury goods can become normal goods or even goods below different income levels, which means that if a wealthy person becomes wealthy enough, they can stop buying an increasing number of luxury cars in order to start collecting. planes or yachts (because at higher income levels, the luxury car would become an inferior good).
Some luxury goods claim to be examples of Veblen products with positive price elasticity of demand. For example, increasing the price of a bottle of perfume can increase the perceived value, which can lead to an increase in sales rather than a decrease.
Luxury items can also refer to services, such as full-time or resident heads and housekeepers. Some financial services can also be considered luxury services by default, since people on low incomes generally do not use them. Luxury goods also have special luxury packaging to differentiate products from traditional products of the same category.
Luxury and quality items
Although the designation of an item as a luxury item does not necessarily imply high quality, these products are often considered to be the most upscale on the market in terms of quality and price. These items may include haute couture clothing, accessories and luggage. Many other markets have a luxury segment, such as the automobile, yacht, wine, bottled water, coffee, tea, food, watches, clothing and jewelry.