Luxury Goods – Are They Really Profitable Investments?

In economics, a luxury item is something that is good not only for its price-value but also because demand increases proportionately to income, so that increased expenses on the item become a proportionate to the increase in income. So when people say that a luxury item is expensive, what they really mean is that the people who want it are spending a larger amount of income than other people who do not. This is why luxury items tend to be more valuable than other things that are less desirable. Luxury items tend to have a high market value because people who can afford them tend to demand higher prices. The higher the demand for luxury items, the higher their prices will be, so if you want to buy a luxury item you are more likely to pay more money than someone who does not.


A luxury good such as a luxury car is good not just because it is expensive and that people want them, but because demand from other people places an elasticity to the economy where the price people are willing to pay for luxury goods also increases proportionately to their incomes. It all works like this because there is a natural law called the Luxury Paradox. Because people feel they have to have these kinds of goods in order to be happy, then they will always demand higher prices for them, which drives up the price of the good itself, and then the demand for goods also increases proportionately to the income of those who own them. Luxury goods are therefore economically productive goods, because everyone has a need for them, and since they increase the economic productivity of society then they tend to increase the value of the entire economy.

Another example of the economic productive nature of luxury goods comes from the fact that they increase the life expectancy of those who use them. Luxury health products such as fine wine have been known to extend human life for thousands of years. The same thing can be said of luxury medical science. Because doctors and hospitals are willing to invest in research and technology to make their work easier, we live in a world were medical progress is made at a faster rate than ever before. This, of course, creates more opportunities for doctors and hospitals to earn more money, driving up the Luxury Goods market even further. As more affluent people buy these products, the market becomes more important, creating more competition, and pushing prices down.