Expenditures may be divided into expenditures for necessaries, expenditures for comforts, and expenditures for luxuries. Under the head of necessaries are here included all of the things that are essential to efficient production. They do not include merely the things which are necessary to keep one alive. These necessaries for efficiency will vary with different persons and different occupations and at different times and places. For example, it might be shown that the workers in a certain place, through ignorance of the best methods of preparing food for human consumption, expended one fourth more for food than they would do if their practice conformed to the best precepts of the art of cooking. We must, however, take them as they are and not as they might be and include in their necessaries the food which with their methods of cookery they find that they must consume if they are to be efficient producers. Again, the idea of necessaries depends upon the time. For example, certain kinds of fruit might be considered necessaries when they are in season but when they are out of season they might be considered expensive luxuries.

The dividing line between comforts and luxuries is a very loosely defined one. The term comforts may be understood to include things that are not necessaries but which under the pressure of public opinion or through habit have come to be looked upon as necessaries. This class of things is sometimes spoken of as conventional necessaries. Luxuries are those economic goods which do not come within either of the classes of necessaries or comforts. Whether or not a good is to be classed as a luxury will often depend as much upon the circumstances of the consumer as upon the character of the good.