What are luxury goods? Luxury goods are not necessarily exclusive to high-end items such as cars, homes, and yachts. In economics, a luxury item is something that provides a benefit superior to its cost (and hence average income) to a market segment that normally pays more. In a sense, luxury goods are demand-driven: they add to the wealth generated by other goods and services that are demand-led, and hence are good investments.
The list of luxury goods is quite long, but some of the most important include electronics (ranging from digital camera to personal computer to cell phone), clothes, automobiles, furniture, travel, holidays, watches, jewelry, brands, food, beverage, and other services (including sports, recreation, culture, leisure, education, business, etc. ), and health care ( ranging from cosmetic treatments to surgical services). In other words, luxury goods generally provide a superior quality or service at a higher price, with the associated premium increasing with demand. In economics, a luxury good would be a good for which increase in income exceeds proportionate proportional to expenditure, so that overall expenses on the good become a higher proportion of overall income. The definition of a luxury good has also been extended to include prestige goods, meaning those items that are perceived to be better than average, and associated with higher status. Thus, things such as yachts, sports cars, designer clothing, and top brands would be considered luxury goods, while normal everyday items would be considered basic or practical luxury good.
The demand for luxury goods typically increases at a faster rate than income. Luxury goods, therefore, have been traditionally defined as those possessions that individuals would willingly pay a premium for, and that are likely to decrease in price over time. Although there are many competing theories concerning the nature of luxury goods, many researchers believe that high levels of perceived value add to the appeal of luxury goods, and that luxury is primarily a function of wealth and perceived status. Luxury goods usually appeal to those who have a relatively high income and a relatively low bottom line.