The Economist on Luxury Goods

by Jörgen Eriksson on July 6, 2013

2011_maybach_57s_62s_hd_widescreen_wallpapers_1920x1200The International University of Monaco, where I teach innovation management to the MBA class, has become a leading academic institution in undergraduate and masters level education on luxury brand management. Increasingly larger number of students are looking to make careers in this field.

As long as there has been people, there has been luxury goods. However the market for luxury goods has exploded in recent decades, as the video below from The Economist explains.

The Economist on Luxury Goods

 

Luxury goods are said to have high income elasticity of demand. As people become wealthier, 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.

Income elasticity of demand is not constant with respect to income, and may change sign at different levels of income. 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.

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