Definition
A Relative Good is a good whose value or utility is not fixed, but depends on context, individual preferences, or comparison with other goods.
Why It Matters
Understanding relative goods is essential in economics because most consumer choices involve trade-offs. The perceived value of a relative good varies with circumstances, scarcity, and the options available.
Example
Luxury handbags are a relative good. Their value is influenced by fashion trends, brand reputation, and the consumer's personal preferences, rather than being universally essential like clean water.