Monday, December 8, 2008
The Quintessential Inferior Good
As noted in this prior post about Wal-Mart, an inferior good is one whose income elasticity of demand is negative, so that when income goes down, demand goes up. Sales of another inferior good, Spam, are also on the rise with the recent economic difficulties. Sales have increased over ten percent in the most recent three months, and the manufacturer (Hormel) has instituted double shifts at its production facility.
For those of you not familiar with the product, Spam "is made of just a few simple ingredients. Ham, pork, sugar, salt, water, a little potato starch, and a mere hint of sodium nitrite to help SPAM® keep its color. Sounds delicious, and it is."