Wednesday, January 21, 2009

Income elasticity of demand

Today bring us reports on two contrasting retailers in the Irish grocery market. Courtesy of we have

These firms aim for different segments of the grocery market and it may be that Aldi sells inferior goods (in the economic sense) and Superquinn normal goods (again in the economic sense).

An interesting study found similar results for Walmart and Target in the US using data from the two retailers. The paper can be read here with the title "Does Walmart Sell Inferior Goods?" The paper was written in April 2008 and WSJ reports in November on the two companies confirms the findings.

For those looking for the meanings of the terms used above we can turn to wikipedia: Normal goods, Inferior goods, Luxury goods and the oft sought for but seldom found Giffen goods which have been traditionally (but incorrectly) associated with potatoes and the Famine times.

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