I.2.2. The Micro-economic Understanding of Luxury

 

The micro-economic understanding of luxury represents a middle scope that is limited to goods that are suitable for exchange on the market. In microeconomics the term luxury goods was established for that and mainly refers to entire product categories (see Meffert and Lasslop 2003, p. 4; Reich 2005, p. 36). The marketability of micro-economic luxury represents its major difference from the philosophical-sociological understanding of luxury. According to Chaudhuri (1998, p. 162), product categories such as barbecue and golf equipment are (still) regarded as luxury goods. The definition of luxury goods can be summarized as follows:

Luxury goods correspond to the micro-economic understanding and the middle scope of luxury, comprising all goods which exceed what is necessary and ordinary, and are suitable for exchange on the market.

 

The Microeconomic Understanding of Luxury

The Microeconomic Understanding of Luxury

 

Luxury goods are distinguished from necessary or ordinary goods by consequence-related measures; thus the luxuriousness of any good is not determined by its characteristics, but by peoples’ reaction (changes in demand) to exogenous stimuli. These measures include price and income elasticity of demand (Pöll 1980, p. 29).

 

Definition of Luxury Goods by Price and Income Elasticity of Demand

Definition of Luxury Goods by Price and Income Elasticity of Demand