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Encyclopedia > Luxury good
A luxury sedan is an example of a luxury good.
A luxury sedan is an example of a luxury good.

In economics, a luxury good is a good for which demand increases more than proportionally as income rises, contrast to a "necessity good" for which demand increases less than proportionally as income rises. Luxury goods are said to have high income elasticity of demand: as people become more wealthy, they will buy more and more of the luxury good. This also means, however, that should there be a decline in income its demand will drop. It must be noted, though, that income elasticity of demand is not constant with respect to income, and may change sign at different levels of income. That is to say, a luxury good may become a normal good or even an inferior good at different income levels, e.g. a wealthy person stops buying increasing numbers of luxury cars for his automobile collection to start collecting airplanes (at such an income level, the luxury car would become an inferior good). Image File history File links Question_book-3. ... Image File history File links Metadata Size of this preview: 800 × 360 pixelsFull resolution (1190 × 536 pixel, file size: 638 KB, MIME type: image/jpeg) I took the picture myself. ... Image File history File links Metadata Size of this preview: 800 × 360 pixelsFull resolution (1190 × 536 pixel, file size: 638 KB, MIME type: image/jpeg) I took the picture myself. ... A 2002 Lincoln Town Car, an example of a flagship luxury sedan A luxury vehicle is a vehicle which provides a great abundance of ease and comfort. ... Face-to-face trading interactions on the New York Stock Exchange trading floor. ... A good in economics is any physical object (natural or man-made) or service that, upon consumption, increases utility, and therefore can be sold at a price in a market. ... The supply and demand model describes how prices vary as a result of a balance between product availability at each price (supply) and the desires of those with purchasing power at each price (demand). ... In economics, the income elasticity of demand measures the responsiveness of the quantity demanded of a good to the income of the people demanding the good. ... In economics, normal goods are any goods for which demand increases when income increases. ... In consumer theory, an inferior good is a good that decreases in demand when the consumers income falls, unlike normal goods, for which the opposite is observed. ...

Contents

Socioeconomic significance

24 Karat Gold jewelery is an example of a luxury good.
24 Karat Gold jewelery is an example of a luxury good.

Certain manufactured products attain the status of "luxury goods" due to their design, quality, durability or performance that are remarkably superior to the comparable substitutes. Thus, virtually every category of goods available on the market today includes a subset of similar products whose "luxury" is marked by better-quality components and materials, solid construction, stylish appearance, increased durability, better performance, advanced features and so on. As such, these luxury goods retain or improve the basic functionality for which all items of a given category are originally designed. Image File history File linksMetadata Size of this preview: 800 × 600 pixel Image in higher resolution (1280 × 960 pixel, file size: 1. ... Image File history File linksMetadata Size of this preview: 800 × 600 pixel Image in higher resolution (1280 × 960 pixel, file size: 1. ...


There are also goods that are perceived as luxurious by the public simply because they play a role of status symbols as such goods tend to signify the purchasing power of those who acquire them. These items, while not being any better (in quality, performance, or appearance) than their less expensive substitutes, are purchased with the sole purpose of displaying wealth or income of their owners. These kinds of goods are the objects of a socio-economic phenomenon called conspicuous consumption and commonly include luxury cars, expensive watches and jewelry, designer clothing, yachts, and large residences such as McMansions, urban mansions and country houses. This article does not cite any references or sources. ... For the business meaning, see Wealth (economics). ... Income, generally defined, is the money that is received as a result of the normal business activities of an individual or a business. ... Conspicuous consumption is a term used to describe the lavish spending on goods and services that are acquired mainly for the purpose of displaying income or wealth. ... A luxury car is a relatively expensive car. ... This page is about timekeeping devices. ... Jewelry (the American spelling; spelled jewellery in Commonwealth English) consists of ornamental devices worn by persons, typically made with gems and precious metals. ... Designer clothing are fashion articles made by fashion designers like Dolce & Gabbana, Christian Dior, Gucci etc. ... This article or section needs copy editing for grammar, style, cohesion, tone and/or spelling. ... A McMansion under construction McMansion is a slang architectural term which first came into use in the United States during the 1980s as a pejorative description. ... This article does not cite any references or sources. ... A country house is a large dwelling, such as a mansion, located on a country estate. ...


Market characteristics

Some luxury products have been claimed to be examples of Veblen goods, with a positive price elasticity of demand: for example, making a perfume more expensive can increase its perceived value as a luxury good to such an extent that sales can go up, rather than down. A commodity is a Veblen good if peoples preference for buying it increases as a direct function of its price. ... In economics and business studies, the price elasticity of demand (PED) is an elasticity that measures the nature and percentage of the relationship between changes in quantity demanded of a good and changes in its price. ...


Although the technical term luxury good is independent of the goods' quality, they are generally considered to be goods at the highest end of the market in terms of quality and price. Classic luxury goods include haute couture clothing, accessories, and luggage. Many markets have a luxury segment including, for instance, cars, wine, and even chocolate. Haute couture (French for high sewing or high dressmaking; IPA: ) refers to the creation of exclusive custom-fitted fashions. ... For other uses, see Wine (disambiguation). ...


Luxuries may be services. The hiring of full-time or live-in domestic servants is a luxury reflecting disparities of income. Some financial services, especially in some brokerage houses, can be considered luxury services by default because persons in lower-income brackets generally do not use them. A poster featuring an illustration of a stereotypical uniformed maid A domestic worker, or simply domestic, is a servant who works within their employers household. ...


Luxury brands

Armani is an example of a luxury brand for clothing.
Armani is an example of a luxury brand for clothing.

A luxury brand or prestige brand is a brand for which a majority of its products are luxury goods. It may also include certain brands whose names are associated with luxury, high price, or high quality, though few, if any, of their goods are currently considered luxury goods. The automobile manufacturer Hummer is an example of such a brand, as a Hummer automobile is considered a status symbol, even though none of the vehicles in the Hummer line-up meet the requirements to be classified as a luxury car. Image File history File linksMetadata Armani. ... Image File history File linksMetadata Armani. ... For other uses, see Brand (disambiguation). ... Hummer is a brand of off-road vehicles sold by General Motors, also known as GM. The H1 version is based on the military High Mobility Multipurpose Wheeled Vehicle (HMMWV, or Humvee). ... A luxury car is a relatively expensive car. ...


Another market characteristic of luxury goods is their very high sensitivity to economic upturns and downturns, high profit margins as well as prices, and very tightly controlled brands. Other guidelines may apply to certain luxury markets such as the luxury vehicle market. A luxury car is a relatively expensive car. ...


For example, following a nearly crippling attempt to widely licence their brand in the 1970s and 1980s, the Gucci brand is now largely sold in directly-owned stores. The Burberry brand is generally considered to have diluted its brand image in the UK in the early 2000s by over-licensing its brand, thus reducing its cachet as a brand whose products were consumed only by the elite. It has been suggested that this article be split into articles entitled Guccio Gucci and Gucci, accessible from a disambiguation page. ... Burberry is a British luxury fashion house, manufacturing clothing and other apparel. ... This article is about the decade of 2000-2009. ...


LVMH (Louis Vuitton Moet Hennessy) is the largest luxury good producer in the world with over fifty brands, including Louis Vuitton, the brand with the world's first designer label. The LVMH group made a profit of 2bn on sales of €12bn in 2003. Other market leaders include PPR (after it purchased the Gucci Group) and Richemont. LVMH Moët Hennessy Louis Vuitton S.A. (Euronext: MC), usually shortened to LVMH, is a French holding company and the worlds largest luxury goods conglomerate. ... Louis vuitton was a great man he was born on fh 12 3845. ... LVMH Moët Hennessy Louis Vuitton S.A. (Euronext: MC), usually shortened to LVMH, is a French holding company and the worlds largest luxury goods conglomerate. ... For other uses, see Euro (disambiguation). ... PPR is a French multinational holding company specializing in retail shops and luxury brands. ... It has been suggested that this article be split into articles entitled Guccio Gucci and Gucci, accessible from a disambiguation page. ... Compagnie Financière Richemont SA is a Swiss luxury goods company that was founded in 1988 by the South African billionaire businessman, Anton Rupert. ...


From the perspective of the consumer of luxury goods (those who can afford the ultimate luxuries), seeking those luxury items not generally offered to the general public is what drives them to certain brands. Luxury brands usually do this by offering different product lines: one that is geared toward affluent consumers who also tend to buy from less "luxurious" brands, and more "exclusive" product lines which are geared toward the really affluent consumer who makes their purchases based on the degree of exclusivity a certain product can afford them. The latter group constitutes an "elite". A rather small group in comparison, they tend to be extremely influential. Once a brand gets an "endorsement" from members of this group, then the brand can be defined as a true "luxury" brand.


Examples include (in alphabetical order): Giorgio Armani, Balenciaga, Hugo Boss, Burberry, Marcela Calvet, Cartier, Coco Chanel, Oscar de la Renta, Christian Dior, Escada, Fendi, Salvatore Ferragamo, Gianfranco Ferre, Givenchy, Hermes, Carolina Herrera, Lacoste, Ralph Lauren, Missoni, Moschino, Miuccia Prada, Valentino, Versace, Louis Vuitton.


Importance of advertising for luxury brands

There is an important balance of emotional and rational communications when a luxury brand connects to its customers through a variety of brand advertising. Historically, luxury brands, especially fashion brands, use heavy visual aids to help foster a sense of emotional connection - a state of being or sense of being. The status of owning luxury brands is important for the affluent or high net worth consumer, as they feel it expresses their class or self-expression. Advertising also ensures that other people who cannot afford the luxury item are nonetheless aware of its expense, which is essential to conferring the status that the consumption of luxury promises. In other cases, luxury brands can connect to the consumer on a very rational level focusing on purpose or function, such as owning a plane or a private jet, or a fractional owner.


See also

Types of goods

public good - private good - common good - common-pool resource - club good - anti-rival goods Wealth effect is the name in economics for spending rising with wealth. ... The Tommy Hilfiger brand is an example of a designer label. ... A Fashion Week catwalk Vogue editors Anna Wintour and André Leon Talley during New York Fashion Week A fashion week is a fashion industry event, lasting approximately one week, that allows fashion designers or houses to display their latest collections. ... A commodity is a Veblen good if peoples preference for buying it increases as a direct function of its price. ... A luxury car is a relatively expensive car. ... In Marxist theory, commodity fetishism is a state of social relations, said to arise in capitalist market based societies, in which social relationships are transformed into apparently objective relationships between commodities or money. ... A good or commodity in economics is any object or service that increases utility, directly or indirectly, not to be confused with good in a moral or ethical sense (see Utilitarianism and consequentialist ethical theory). ... In economics, a public good is a good that is non-rival and non-excludable. ... In economics Private good is an opposite of the public good. ... It has been suggested that this article or section be merged into Common pool resource. ... The terms common-pool resource (CPR), alternatively termed a common property resource, is a particular type of good, and a natural or human-made resource system, whose size or characteristics of which makes it costly, but not impossible, to exclude potential beneficiaries from obtaining benefits from its use. ... Club goods are a type of goods in economics, sometimes classified as a subtype of public goods, that are non-competetive and excludable. ... This term is a neologism, coined by (Weber) to describe goods created by a process of reciprocal exchange for mutual benefit, such as open source software. ...

rivalrous good and non-excludable good
complement good vs. substitute good
free good vs. positional good

(non-)durable good - intermediate good (producer good) - final good - capital good
inferior good - normal good - ordinary good - Giffen good - luxury good - Veblen good - superior good
search good - (post-)experience good - merit good - credence good - demerit good - composite good In economics, a good is considered rivalrous if its consumption by one person prevents it from being available to others. ... Excludability is defined in economics as whether or not it is possible to exclude people who have not paid for a good or service from consuming it. ... A complement or complementary good is defined in economics as a good that should be consumed with another good; its cross elasticity of demand is negative. ... In economics, one kind of good (or service) is said to be a substitute good for another kind insofar as the two kinds of goods can be consumed or used in place of one another in at least some of their possible uses. ... The free good is a term used in economics to describe a good that is not scarce. ... A positional good is an intrinsically scarce good whose value is determined by its social context, as opposed to a material good which has innate value. ... A car (Toyota Corolla S) is a durable good in economics. ... Intermediate goods or producer goods are goods used as inputs in the production of other goods, such as partly finished goods or raw materials. ... In economics Final goods are goods that are ultimately consumed rather than used in the production of another good. ... Capital goods, in contrast to consumer goods, are goods used in the production of (physical) capital. ... In consumer theory, an inferior good is a good that decreases in demand when the consumers income falls, unlike normal goods, for which the opposite is observed. ... In economics, normal goods are any goods for which demand increases when income increases. ... An ordinary good is a microeconomic concept used in consumer theory. ... A Giffen good is a product for which a rise in price of this product makes people buy even more of the product. ... A commodity is a Veblen good if peoples preference for buying it increases as a direct function of its price. ... Superior goods make up a larger proportion of consumption as income rises, and as such are a type of normal goods in consumer theory. ... In economics, a search good is a product or service with easily observable features and characteristics. ... In economics, an experience good is a product or service where product characteristics such as quality or price are difficult to observe. ... A merit good is defined in economics as a good that is under consumed if provided by the market mechanism because individuals typically consider how the good benefits them as individuals rather than the benefits that consumption generates for others in society. ... A credence good is a term used in economics for a good whose utility impact is difficult or impossible for the consumer to ascertain. ... In economics, a demerit good is a good or service that is seen as intrinsically unhealthy, degrading, or socially damaging towards other persons and/or society at large once consumed. ... // Definition A composite good is an abstraction used in economics that represents all other choices of consumption that can be made. ...


  Results from FactBites:
 
Luxury good - Wikipedia, the free encyclopedia (854 words)
Luxury goods are said to have high income elasticity of demand: as people become more wealthy, they will buy more and more of the luxury good.
That is to say, a luxury good may become a normal good or even an inferior good at different income levels, e.g.
There are also goods that are perceived as luxurious by the public simply because they play a role of status symbols as such goods tend to signify the purchasing power of those who acquire them.
luxury good: Information from Answers.com (1121 words)
Classic luxury goods include haute couture clothing, accessories, and luggage.
Another market charateristic of luxury goods is their very high sensitivity to economic upturns and downturns, high profit margins as well as prices, and very tightly controlled brands.
Like other sectors of the retail market, luxury goods retailers like to cluster their stores closely together in order to create a shopping "destination." In the case of luxury goods, these areas are generally perceived to be centers of luxury retailers.
  More results at FactBites »

 
 

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