Sunday, April 24, 2011

If you like beer, don't make over $22,000 per year--Apparently you become too sophisticated and responsible at that income level...

Perhaps the MOST interesting thing about the study quoted below is that it came from an organization called "The American Association of Wine Economists"--Yes, you read that right. Who says economists are boring...But I digress...

This blog entry at Economix is about the increase in consumption of beer by the Chinese, but I was intrigued by this nugget of information:

...That story can be repeated for any number of consumer goods, of course. But what’s interesting about beer is that the trend is not likely to last. A paper by two economists at the University of Leuven, in beer-loving Belgium, finds that people drink more beer as their incomes rise, until they make about $22,000 a year.

Then they start drinking less beer.
The paper, brought to my attention by the Reuters blogger Felix Salmon, doesn’t offer much in the way of explanations, but perhaps the most obvious one is something many Americans personally experience in their 20s. As you start making more money, and assuming more responsibility, there is less opportunity to drink -– and the potential consequences become more costly.
An income of $22,000 seems to be the breaking point where beer crosses over from a normal good to an inferior good.  If income increases and the demand for a good increases then it is considered a normal good. If income increases and the demand for a good decreases then it is considered an inferior good--people substitute away from the inferior good to a normal good as income increases.  In this case, the study finds wine becomes the normal good as income goes over $22,000.   

This type of information is important to marketers of all products, not just alcohol.  A nice example of how research at a Microeconomics level is useful to businesses...It also can be an example of potential "research bias"--I wonder who funds the "American Association of Wine Economists". Well, maybe the wine industry does not fund it, but I am guessing "the drinks are on the house" at the minimum...

I especially liked the comment in the last line (underlined)---as with most things economically related it starts (and ends) with OPPORTUNITY COSTS... :)

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