How does the luxury index affect demand?

How does the luxury index affect demand? - Couple Sitting on the Couch

Each product in Capitalism 2 has a necessity index and a luxury index.

I understand what the necessity index does: necessity of 10 (i.e. 100%) means no change in demand during recessions, high necessity means low decrease in demand during recessions, and low necessity means high decrease in demand during recessions. However, I don't know what the luxury index does. How does the luxury index affect demand?

For reference, below is a screenshot of Capitalism 2's product database where the luxury index for each product appears in the column named "LUXURY":

Capitalism 2 product database

Source: editable game - Capitalism II and Capitalism Lab Forum

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What factors affect the demand for luxury goods?

They also indicated that the main determinants for luxury consumption tendency were self-enhancement and social luxury values. On the other hand, increasing household income might be a determinant of purchasing luxury goods because raised income may lead to increased demand for luxury goods.

How is the demand of luxury goods?

Demand for luxury goods increases when a person's wealth or income increases. Typically, the greater the percentage increase in income, the greater the percentage increase in luxury item purchases. Since luxury goods are expensive, wealthy people are disproportionate consumers of luxury goods.

Do luxury goods follow the law of demand?

Certain types of luxury goods violate the law of demand. Veblen goods are named after American economist Thorstein Veblen. Generally, they are luxury goods that indicate the economic and social status of the owner. Therefore, consumers are willing to consume Veblen goods even more when the price increases.

Is the demand for a luxury item?

Luxury goods have high income elasticity of demand: as people become wealthier, they will buy proportionately more luxury goods. This also means, however, that should there be a decline in income, its demand will drop more than proportionately.

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Sources: Stack Exchange - This article follows the attribution requirements of Stack Exchange and is licensed under CC BY-SA 3.0.

Images: cottonbro, Andrea Piacquadio, Andrea Piacquadio, cottonbro