26 February 2009

Inferior Good

Not that there is a shortage of examples of economic principles at work lately, but I thought this story was a perfect example, plus it is dissected and explained on my favorite economics blog. Starbucks will be offering instant coffee as they make changes to handle consumers holding more tightly to their wallets. As disposable income decreases, consumers shift from normal (or premium) goods to inferior goods. And Starbucks isn't one to miss a trick, so they want to be there if and when you do switch and keep you as a customer albeit in your kitchen instead of one of their stores.

1 comment:

  1. very good story, interesting, the author has a master of education in economics. teaching at an international school. sounds fun.