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”