Question

Difference between necessity and luxury in economics

Answer 1

In economics, a luxury good (or upmarket good) is a good for which demand increases more than proportionally as income rises, and is a contrast to a "necessity good", where demand increases proportionally less than income. Luxury goods is often used synonymously with superior goods and Veblen goods.

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Answer 2

In economics, demand for necessary goods generally does not increase in proportion to the income of an individual.

However, the demand for luxurious goods increases in proportion to the income of an individual.

Explanation:  

• Necessity is something which is a basic requirement and the amount spent on it generally remains the same irrespective of the rise in income.  
• The expense of food items will remain the same irrespective of the rise in income.
• However, luxury goods are purchased when income rises to a certain level. Jewelry or car or new house is purchased when income rises and savings increases.

Learn more about necessity and luxury:

Environment as a necessity and luxury

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