What makes a luxury product?

Fashion, as the subtlest and most volatile form of luxury, is also the most difficult to understand. Dwight E. Robinson

On the surface it seems that a luxury good is simply something expensive, something high quality, and perhaps something involving a certain experience. But, on the other hand, it’s also clear that luxury also involves an element of subjectivity: what is luxury for me may be ordinary for others.

Perhaps a better definition is one from economics: a luxury good is a good that sees it’s demand increase disproportionately to increases in income. In the chart below you can see the slope of the red line (luxury demand curve) increases at a much faster rate than the gray 45° line. As my income increases, after a certain point, I stop worrying about meeting my basic needs (clothing, food) and start thinking about how nice it would be to own that Hermes Birkin bag.

In order to dispel any confusion: please note that whilst luxury goods are income-demand elastic they are often price-demand inelastic.