Analysis of goods: Normal goods
Other
Some goods are normal goods at lower income levels and inferior goods at higher income levels. One example is the fast food category in the US restaurant industry (e.g., McDonalds). In this case, lower income consumers will purchase more fast food if they earn small increases in income. However, the consumers will substitute other types of food and purchase less fast food as their income rises to much higher levels. Can you think of a second example from some other industry in the US or another country?
Suppose you are the marketing manager for a company that faces this sort of demand response from the customers of its major products. How would you develop an advertising program that adapts to this behavior over the growth (increasing income) and recession (declining income) stages of the macro economy? For example, would you change your pricing policy as the economy grows or declines, or would you change the target audience for your ads? Are there other things your could do in this situation?
