Reviewed by Sep 30, 2020| Updated on
A luxury item is not any item that is essential to living but is considered highly desirable within a society or culture. Wealthy people are disproportionate buyers of luxury goods because luxury goods are costly. This is because the less affluent an individual is, they need to spend a higher percentage of their income on the things they need to survive on.
Luxury goods are often manifestations of conspicuous consumption, which is the buying of products to show off one's riches primarily or exclusively.
In the U.S., specific luxury items may be subject to a specific tax or a "luxury tax." Luxury taxes are regarded as progressive since they usually only affect individuals with high income or net wealth. Luxury items have an income elasticity of demand, meaning as and when individuals get wealthier, they might purchase more luxury items.
Likewise, the demand for luxury items would decrease if there is a reduction in income. For example, increasing the price of a perfume bottle can result in increased perceived value, thereby causing sales to increase, versus a dip in sales.
Luxury items can also apply to service providers, such as full-time chefs and housekeepers. A few financial services may also be considered as luxury services by default because they are usually not used by individuals in lower-income brackets. Luxury items will also have special luxury packaging which distinguishes the products from the same category of mainstream products.
When an item is designated as a "luxury item" it does not automatically connote high quality; in terms of quality and price, these items are often considered to be at the highest end of the market.
These items could include luggage, shoes and haute couture garments. Several other markets comprise a luxury segment, such as a car, yacht, wine, bottled water, coffee, tea, food, watches, automobile, clothing, and jewellery.