The majority of markets presently in existence have a section of their market where the products are considered luxury goods. Luxury goods generate their elevated status due to their superior durability, increased quality, excellent performance, and/or stylish and appealing design. Typically, luxury goods are composed of more expensive and higher quality ingredients and materials, and more care is taken in their overall development. Because of their more dedicated compositions, luxury goods often retain their functioning purposes for longer periods of time than other, less expensive, substitutes.
Demand in this industry is directly linked to income of consumers, but the luxury goods industry it touted to have high “income elasticity of demand”. This refers to the principle that as the income of the consumer rises (creating wealth), they will invest more of their money in the luxury good market. This also comes with the stipulation that should income levels drop, as would the demand for these specific goods. The income elasticity of demand is not a constant standard, and undergoes much fluctuation.