Thursday 22 December 2016

Shifting consumer preferences

The sales of fish fingers (frozen processed fish in breadcrumbs) is on the rise, Fish fingers were a popular 1970's dish, but declined in popularity over time. This is a perfect example of changing conditions of demand.
                
We know that the relationship between the price of a product and the quantity demanded will obey the law of demand. However the quantity of a product will vary while the price remains the same due to changing conditions of demand which shift the demand curve.

As the 1980's and 1990s' progressed real incomes rose. Changing real income is a change in the conditions of demand and revealed that fish fingers are inferior goods. The demand curve for fish fingers shifted to the left, while demand for substitutes for fish fingers, normal goods, shifted to the right. This might have included the wonderful Chicken Kiev in the 1980's and pre-prepared meals such as curry's in the 1990's.

The demand curve for fish fingers now appears to be shifting right once again and it's not the law of demand that is causing it. Rather the concerns about the dangers of processed meant, such as bacon and sausages, is being credited with the change. As the demand for the substitute goods shifts left the demand for fish fingers shifts back to the right. The result is that more fish fingers are being bought at the market price, while fewer sausages and bacon rashers are purchased.

The diagram below shows the effect. The demand curve in each market shifts from D to D' as tastes and preferences, another condition of demand, changes for each good.
                                             Fish fingers                        Sausages
The article from the Daily Telegraph below explains some other factors and provides some numbers on the changes in quantities. If you are considering this for a microeconomics IA you should draw your own diagrams and incorporate the numbers.

Note that the rise in fish finger consumption could also be due to falling real incomes in the UK, particularly in lower income households. That is the income effect and shows fish fingers are still an inferior good. 

 


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