ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Luxury goods commonly have an income elasticity of demand that is greater than one and include items like expensive cars, vacations, fine dining, and gym memberships.

Detailed explanation-2: -If a good is a luxury, its income elasticity of demand is Positive and greater than 1. If income elasticity of demand of a commodity is less than 1, it is a necessity good.

Detailed explanation-3: -Luxury items tend to be sensitive to a person’s income or wealth, meaning that as wealth rises, so do purchases of luxury items. As a result, luxury items are considered to show positive income elasticity of demand, which is a measure of how responsive the demand is for a good to a change in a person’s income.

Detailed explanation-4: -In economics, a luxury good (or upmarket good) is a good for which demand increases more than what is proportional as income rises, so that expenditures on the good become a greater proportion of overall spending. Luxury goods are in contrast to necessity goods, where demand increases proportionally less than income.