Sausages, inferior goods and derived demand

One of my favourite sausage jokes is the one about a well-known chef Anthony Worrall-Thompson putting his broad face on a packet of fresh sausage meat with the immortal words printed underneath:
“Prick with a fork”

Back to business. Ewan Ramsay one of my AS micro students produced this super blog on the link between market demand for sausages and the economic fortunes of companies that make the casings for sausage production used in the food processing industry. Here it is ... with a big hat tip to Ewan

“It is expected that demand for sausage casings could dramatically rise next year. Devro, one of the world’s leading suppliers of manufactured casings for the food industry has reacted to this prediction and the company has raised further investment in order to increase capacity as demand for sausage casings and collagen products have soared.

The main reason for this sudden increase in demand can be explained by the fact that sausages are a basic staple good and therefore are widely considered to be an inferior good. In this current economic crisis where week after week countries are falling into recession and unemployment rates have spiked, incomes are declining. According to income elasticity of demand as incomes fall the demand for inferior goods will rise. The combination of this and the rising demand for meat products in the developing world will boost demand for Devro and other collagen producers’ products. Devro has expected that profits will increase from £15.6 million to £16.9 million and revenue will increase from £156 million to £181 million in the following year. Devro’s sales have shown good growth in Europe and Asia and in the US and it is expected that these foreign sales will continue to grow strong”

Unit 2 Macro: Cyclical and Structural Economic Issues Facing the UK [23 May 2012]
Unit 3 Micro: Game Theory and Business Economics [21 May 2012]
Unit 2 Macro: Positive and Negative Multiplier Effects [20 May 2012]
Unit 2 Macro: The Importance of Productivity [20 May 2012]
Q&A: What do we need to know about output gaps? [20 May 2012]
Unit 2 Macro: The Output Gap [20 May 2012]
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Unit 1 Micro: Revision Presentation on Elasticity of Demand [16 May 2012]
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Unit 1 Micro: Revision on Rice Prices [13 May 2012]
Unit 1 Micro: Price Elasticity of Supply [13 May 2012]
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Unit 1 Micro: Price Elasticity of Demand [13 May 2012]
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Unit 2 Macro: Revision Notes on Supply-side Policies [10 May 2012]
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Unit 2 Macro: Unemployment Glossary [5 May 2012]
Unit 2 Macro: Economic Cycle Glossary [5 May 2012]
Unit 2 Macro: Aggregate Demand Glossary [5 May 2012]
Macro Revision - Key Statistics on the UK Economy [4 May 2012]
Unit 1 Micro: Using the Cost-Benefit Principle [30 Apr 2012]
Macro Revision: Putting Things in Context [29 Apr 2012]
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Unit 2 Macro: Britain back in Recession [29 Apr 2012]
Unit 4 Macro: The Euro Zone Crisis (Revision) [22 Apr 2012]
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Unit 2 Macro: Skills Shortages Hold Back Recovery [12 Apr 2012]
Unit 3 Micro: Evaluation Question on Supermarkets [11 Apr 2012]
Unit 2 Macro: How the Economic Cycle affects Businesses [6 Apr 2012]
Unit 3 Micro: Revision on Scale Economies and MES [5 Apr 2012]
Unit 1 Micro: Revision on Price Elasticity of Supply [5 Apr 2012]
Unit 3 Micro: Revision on the Law of Diminishing Returns [4 Apr 2012]
Unit 1 Micro: Revision on Elasticity of Demand (for Rice) [3 Apr 2012]
Unit 1 Micro: Revision on Producer Subsidies [2 Apr 2012]
Unit 3 Micro: Revision on Scale Economies, Technology and Prices [1 Apr 2012]
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Unit 1 Micro: Revision on Maximum Rents in Housing [1 Apr 2012]
Unit 1 Micro: Revision on Producer Cartels [31 Mar 2012]
Unit 2 Macro: Revision on Index Numbers [31 Mar 2012]
Unit 2 Macro: Revision on Capital Investment [30 Mar 2012]
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Unit 4 Macro: Focus on India - World’s Cheapest Computer [26 Jan 2012]
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