In economics, a luxury good (or upmarket good) is a product or item or service for which demand increases more than what is proportional as income rises, so that expenditures on the good become a more significant proportion of overall spending. Luxury goods are in contrast to necessity goods, where demand increases proportionally less than income. Whereas people consume necessity goods to meet basic survival needs, luxury goods are consumed both for their "intrinsic quality and to signal their wealth and confirm social status." In economics, luxury goods is often used synonymously with superior goods.
Definition, etymology and usage
The word "luxury" comes from the Latin term "luxuria", which meant "excess, extravagant living, profusion; delicacy." The meaning gained different implications as the word became part of Old French as "luxurie" in the 12th century, taking on the sense of "debauchery, dissoluteness, [or] lust." The word "luxury" has an etymological cognate in the Latin verb luctor meaning "to overextend" or "to strain". From this, the noun luxuria and the verb luxurio developed, "indicating immoderate growth, swelling, ... in persons and animals, willful or unruly behavior, disregard for moral restraints, and licentiousness", and the term has had negative connotations for most of its long history. One definition in the OED is a "thing desirable but not indispensable". As the word became part of the English language it "lost its pejorative taint"; by the 1630s, the English word meant "habit of indulgence in what is choice or costly" and by 1704 it meant "sumptuous surroundings." By 1780, the word was defined as "something choice or comfortable beyond life's necessities." Economists can identify a luxury good by comparing the demand for the good at one point in time against the demand for the good at a different time, at a different income level. When personal income increases, demand for luxury goods increases even more than income does. Conversely, when personal income decreases, demand for luxury goods drops even more than income does. For example, if income rises 1%, and the demand for a product rises 2%, then the product is a luxury good. This contrasts with necessity goods, or basic goods, for which demand stays the same or decreases only slightly as income decreases.
Scope of the term With increasing accessibility to luxury goods, new product categories have been created within the luxury market, called "accessible luxury" or "mass luxury". These are meant specifically for the middle class, sometimes called the "aspiring class" in this context. Because luxury has diffused into the masses, defining the word has become more difficult. Whereas "luxury" often refers to certain types of products, luxury is not restricted to physical goods; services can also be luxury. Likewise, from the consumer perspective, luxury is an experience defined as "hedonic escapism".
Confusion with normal goods In economics, "superior goods" is the gradable antonym of "inferior good". If the quantity of an item demanded increases with income, but not by enough to increase the share of the budget spent on it, then it is only a normal good and is not a superior good. Consumption of all normal goods increases as income increases. For example, if income increases by 50%, then consumption will increase (maybe by only 1%, maybe by 40%, maybe by 70%). A superior good is a normal good for which the proportional consumption increase exceeds the proportional income increase. So, if income increases by 50%, then consumption of a superior good will increase by more than 50% (maybe 51%, maybe 70%). In economics terminology, all goods with an income elasticity of demand greater than zero are "normal", but only the subset having income elasticity of demand > 1 are "superior". Some articles in the microeconomics discipline use the term superior good as an alternative to an inferior good, thus making "superior goods" and "normal goods" synonymous. Where this is done, a product making up an increasing share of spending under income increases is often called an ultra-superior good.
Art history
Though often verging on the meaningless in modern marketing, "luxury" remains a legitimate and current technical term in art history for objects which are especially highly decorated to very high standards and which use expensive materials. Luxuries like this can play a role in developing trade-relations with colonies. The term is especially used for medieval manuscripts to distinguish between practical working books (for normal use) and fully illuminated manuscripts, that were often bound in treasure bindings with metalwork and jewels. These are often much larger, with less text on each page and many illustrations, and (if liturgical texts) were originally usually kept on the altar or in the sacristy rather than in any library that the church or monastery who owned them may have had. Secular luxury manuscripts were commissioned by the very wealthy and differed in the same ways from cheaper books. "Luxury" and "luxury arts" may be used for other applied arts where both utilitarian and luxury versions of the same types of objects were made. This might cover metalwork, ceramics, glass, arms and armour, and various objects. It is much less used for objects from the fine arts, with no function beyond being an artwork: paintings, drawings, and sculpture, even though the disparity in cost between an expensive and cheap work may have been as large. By 2026, luxury goods will no longer be defined solely by rarity or high prices, but also by their symbolic, cultural, and experiential value. Contemporary luxury is commonly associated with craftsmanship, brand heritage, exclusivity, sustainability, and the ability to communicate personal identity and social status.
History
An awareness of a concept of luxury dates back at least as far as Plato. The issue of luxury was also considered by John Locke, Adam Smith, Karl Marx, Georg Simmel, and Max Weber.
Market
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