My coworkers and I were talking about the concept of voluntarily paying more than you need to for something. As an example, I can buy a locally grown organic apple from the farmers market for \$3 or a conventional one from the grocery store for \$0.50. We can say that the \$0.50 apple is a basic level of consumption- society agrees that I deserve that apple as a human right (or, we can expand the argument to a basic level of consumption including shelter, food, etc). Since I paid \$3 instead of \$0.50, I paid an extra $2.50 for the luxury if it being a special kind of apple I prefer.

We called this amount "marginal luxury". Does economics have a proper name for it? Is there a reliable source of how much of an economy, say the US, is marginal luxury?

  • $\begingroup$ The Undercover Economist calls this price targeting. Although it seems to be more of a supply-side term when you're talking about demand-side. $\endgroup$ – paj28 Oct 7 '16 at 19:11
  • $\begingroup$ @paj28 I'm also talking more about different products. As a different example, we might societially decide that all adults deserve the equivalent of a 2008 Toyota Camry. If you buy a 2017 Lexus GX instead, the difference in those prices is what I'm interested in. $\endgroup$ – ericksonla Oct 7 '16 at 19:44

The closest I can think of is Stone-Geary utility/preferences, where consumption is assumed to provide utility only above a specific level (the $\gamma_i$ parameter in the link), which is usually designated as the "subsistence level".

As for how much an economy is above this subsistence threshold, a way to roughly assess this is to calculate what would Total Income be if all people were at the poverty-line-income (each country determines its own poverty line). Then subtract this from the actual Total Income. What is left can be thought of as what the OP is looking for.

But calling it "luxury", implies that any consumption above the level guaranteeing mere survival is a luxury. Is it?

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  • $\begingroup$ Is it mere survival though? According to the question the threshold can be anything society agrees on. $\endgroup$ – Giskard Oct 10 '16 at 22:11
  • $\begingroup$ @denesp Certainly. I just offered what appears to be a plausible candidate for that. $\endgroup$ – Alecos Papadopoulos Oct 10 '16 at 23:12

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