What typically happens to the demand for luxury goods when consumer incomes rise?

When consumer incomes rise, the demand for luxury goods typically increases because these products are considered non-essential and often represent a higher level of quality, status, or extravagance. Luxury goods are often defined by their exclusivity and premium pricing, which makes them more appealing to consumers as their purchasing power increases.

As people have more disposable income, they are likely to spend a portion of that additional income on goods that enhance their lifestyle or provide a sense of prestige. This phenomenon is known as the positive relationship between income and the demand for normal goods, and it is especially pronounced for luxury goods. Increased incomes signal consumers' ability to afford more than their basic needs, shifting their preferences towards items that offer comfort, style, or status.

In contrast, if consumer incomes were to decrease, the demand for luxury goods would likely drop, as individuals prioritize essential and lower-cost items. Similarly, if incomes remained unchanged, demand would stabilize around current levels, and if demand became perfectly inelastic, it would indicate that changes in price would not affect the quantity demanded, which is not typically the behavior observed with luxury goods where demand generally becomes more sensitive to income changes.