Do you ever wonder what are luxury goods inelastic? Well this is very important because when we say luxury good we do not just mean the most expensive, but we can also mean the most comfortable. The two words in the question can be interchanged without any problems. The definition of luxury goods can be given as a high quality good that is good to use and it will last forever, just like the word in elastic.
Luxury goods inelastic are those goods that do not shrink or stretch. This is not to mean that luxury goods do not have any durability. There are some goods that do not shrink or change shape when exposed to light. These are the so-called inelastic goods.
We would, in this article, look at some of the examples of such goods. Some of them may interest you. They may even get you interested in trying out these products yourself. So let us begin.
A table lamp with gel candle inside is an example of inelastic goods. If we take a closer look, we will see that the candle gel is not actually contained within the lamp but is present in its external casing. This means that the gel candle cannot be compressed into a small volume by any physical effort. In fact if you were to do that the candle would simply melt and collapse. So, while the gel can be stored safely inside the outer casing we have already ruled out its shrinking or change shape.
We have looked at some inelastic goods, and while we still have more to go, let us look at the remaining ones. Now what are luxury goods inelastic in nature? The answer is simple: money! Any good that is non-rivalrous and/or difficult to duplicate (including money) is said to be inelastic – that is it will not attract any demand from other goods.
Now consider the case of two identical goods, say a dress and a suit, which can be purchased at the same shop. Suppose now that this shop has increased its stock of dresses and suits and is willing to sell its original dress for a higher price so that it can make more sales. Which goods are more valuable? The answer of course will be the dress, because that dress will attract more buyers, and it will be worth more money as a result.
So while many goods will lose their elasticity when the physical quantities increase, there are goods that will retain their value – in other words they will gain in elasticity. Take away the ability of a product to attract demand, and then there will be nothing left of the original commodity to be bartered for. Goods will either be forced to become unsellable / worthless, or else they will be reabsorbed into the economy by consumers. If demand falls, then producers of that product will have no buyers and therefore no choice but to produce goods at a lower quality – this is true of all goods. But if demand increases, then it is now possible to produce the item at a higher standard of quality, and therefore it becomes valuable once again.
So in general, goods that are hard to duplicate will tend to gain in elasticity. But other goods will lose elasticity when the quantity of supply exceeds the total number of buyers wishing to purchase them. Demand therefore is a key determinant of the price of goods. So if you are considering whether particular goods are inelastic, then you need to understand what the relationship between demand and elasticity is. The best way of figuring out if a good is inelastic is to calculate its “demand-to-production” ratio – this ratio is related to how much of the item’s production is taken up by consumers. If it is high, then it may be that there are not enough buyers to make the item available for sale.