The Economics of Fashion

A Special Report by Michelle Law

Fashion goods are luxury goods which are generally consumed by people with a certain level of income. It has a low degree of necessity therefore they have relatively high price elastic demand which indicates the responsiveness of the consumers. Furthermore, they are heavily dependant on individual’s taste and preferences as fashion is very subjective as not all designs and cuts would suit a person’s likes or preferences and needs. Also, they are many different types of fashion which cater to different needs such as Haute Couture, Ready to Wear and mass produced lines.

The demand for fashion depends heavily on income and the needs of its consumers. When income increases, consumers have more purchasing power and might chose to upgrade the standard of the good they are currently consuming, for example buying a branded ready-to-wear instead of a piece from a mass produced line. This would cause a change in demand for each type of fashion, a fall in mass produced lines but an increase in ready-to-wear.

Moreover, fashion is generally implied to be related with clothing but unlike clothing, consumers pay for the design and the workmanship involved in producing the good. Thus, clothing would be considered as an inferior good because more people would chose not to buy it when their income increases. In contrast to fashion, clothing would be a necessity as it protects the body from harsh weather and safety reasons.

Alternatively, in fashion, there is limited supply such as in haute couture where such fashion houses produce a limited amount of designs which are handmade as it made to order for a specific customer, and it is usually made from high-quality, expensive fabric and sewn with extreme attention to detail and finish, often using time-consuming, hand-executed techniques. This creates a brand identity and exclusiveness for its customers and maintains the demand for the luxury good which in effect indirectly discriminates consumers as more purchasing power the individual has, the more choices and ability to purchase the good he/she wants.

Current trends and fads in fashion play an extremely important role in the demand of the good as it can influence consumer’s choice. The media coverage today is an extremely influential tool, especially the existence of fashion magazines and editorial critiques on the internet as well as published works. It can sway and steer the course of fashion trends in the world today by advertising certain brands or designs which would affect consumer’s decisions or at the very least form some impact on its audience. Even celebrities who are gaining increasing attention from the public can persuade to consumers and start a new fashion trend thus affecting the demand of the goods.