What is a luxury good?

Yes, I know the economic definition of a luxury good but I want to know the Monkey’s definition of a luxury good. (For those that don't, I'll post it at the end)

I recently read about a guy who has spent a great deal of time documenting what, exactly, a dollar will allow you to purchase in the supermarket. The example he likes to use, and the one that made me think of this, was that of a blueberry. He claims, and I have no idea if this is true or not, that a blueberry is considered by nutritionists to be a super food full of all the nutrients a person could possibly need. A dollar will apparently get you roughly 22-24 run of the mill blueberries at the grocery store but if you want the organic blueberries, those cost about 10 cents a piece or about 10 for a dollar. He goes on to claim that these ‘normal’ blueberries have less nutritional value than the organic version because of the pesticides used in farming them. The point is, you pay more to get the better stuff (I was shocked too). But when does this ‘nutritional premium’ make something a luxury rather than a necessity?

Here’s the question I’m posing to you my fellow primates as you start your week. Where’s the line? When does food become a luxury? Or, better yet good or service? Transportation? Most of us, with a little effort, could easily use public transit and negate the need for a car but don’t for convenience sake. Is this a luxury even if your car is tore up from the floor up and was passed down from your parents to your sibling and then on to you? Clothing? Grooming? Pick whatever item you want.

On a forum populated by people largely influenced by compensation and status, I was curious as to how some of you would answer this. We talk about Ferragamo Loafers and Patek Phillipe Watches on WSO almost every day but when does something go from being a necessity to being a luxury in the real world, not in the textbook?

According to LSE Glossary of Economic Terms:
Luxury Good: One which has an elasticity larger than one

 
blastoise:
My lover, my life. My shorty, my wife.

Is that a luxury good or an expense...I thought you were anti girlfriend anyway squirtz

If I had asked people what they wanted, they would have said faster horses - Henry Ford
 

Anything that decreases in perception as the price goes down. Standard, yet sufficient definition

 
happypantsmcgee:
when does something go from being a necessity to being a luxury in the real world, not in the textbook?

As far as I can tell, pretty much nothing is a necessity. Most things we don't need, we just want. I guess then, the question is, where exactly on the continuum of wants does luxury begin?

 
monkeysama:
I draw the line when the marginal cost exceeds the marginal benefit in my utility function. Determining the exact parameters of my utility function is left as an exercise for the reader.
By definition, a "rational consumer" would never buy something with marginal benefit less than cost. I think you forgot to include some intangible value to your utility (i.e. a patek has a higher utility than a swatch even though the function is the same, as it strokes your ego or whatever)
 

Sequi praesentium velit sint explicabo. Saepe laboriosam perspiciatis provident fugit est. Ea vel quia consequatur quia sit optio. Molestiae delectus explicabo fugiat maiores. Ducimus aut velit quis et. Mollitia quod quas minima quia ut qui. Ea omnis dicta dicta ipsa.

looking for that pick-me-up to power through an all-nighter?

Career Advancement Opportunities

March 2024 Investment Banking

  • Jefferies & Company 02 99.4%
  • Goldman Sachs 19 98.8%
  • Harris Williams & Co. (++) 98.3%
  • Lazard Freres 02 97.7%
  • JPMorgan Chase 03 97.1%

Overall Employee Satisfaction

March 2024 Investment Banking

  • Harris Williams & Co. 18 99.4%
  • JPMorgan Chase 10 98.8%
  • Lazard Freres 05 98.3%
  • Morgan Stanley 07 97.7%
  • William Blair 03 97.1%

Professional Growth Opportunities

March 2024 Investment Banking

  • Lazard Freres 01 99.4%
  • Jefferies & Company 02 98.8%
  • Goldman Sachs 17 98.3%
  • Moelis & Company 07 97.7%
  • JPMorgan Chase 05 97.1%

Total Avg Compensation

March 2024 Investment Banking

  • Director/MD (5) $648
  • Vice President (19) $385
  • Associates (86) $261
  • 3rd+ Year Analyst (13) $181
  • Intern/Summer Associate (33) $170
  • 2nd Year Analyst (66) $168
  • 1st Year Analyst (202) $159
  • Intern/Summer Analyst (144) $101
notes
16 IB Interviews Notes

“... there’s no excuse to not take advantage of the resources out there available to you. Best value for your $ are the...”

Leaderboard

1
redever's picture
redever
99.2
2
Secyh62's picture
Secyh62
99.0
3
Betsy Massar's picture
Betsy Massar
99.0
4
BankonBanking's picture
BankonBanking
99.0
5
kanon's picture
kanon
98.9
6
CompBanker's picture
CompBanker
98.9
7
dosk17's picture
dosk17
98.9
8
DrApeman's picture
DrApeman
98.9
9
GameTheory's picture
GameTheory
98.9
10
bolo up's picture
bolo up
98.8
success
From 10 rejections to 1 dream investment banking internship

“... I believe it was the single biggest reason why I ended up with an offer...”