Hamburger Helper Sales Rise

EconEye Admin

8 months ago

During the 2008 financial crisis and the Covid pandemic in 2020, sales of Hamburger Helper increased. Even today, with the price for food consumed at home 21 percent higher than it was four years ago, sales are up 14.5 percent in the year through August.—nytimes.com

Answer the following questions to check your understanding of the story.

How has real income in terms of food changed in the last four years?

Food prices increased, so real income in terms of food _________.

a) increased

b) didn’t change because real income is independent of food prices

c) decreased

d) decreased by 21 percent, the same percentage that food prices rose

Wrong! - Real income is calculated as income divided by the price level. When money income increases by less than the rise in the dollar price of food, how does real income in terms of food change?

Correct! - A household’s real income is its income expressed as a quantity of goods that the household can afford to buy. When money income increases by less than the rise in the dollar price of food, households can purchase less food so real income in terms of food decreases.

What does the increase in sales of Hamburger Helper and your answer to #1 tell us?

a) The supply of Hamburger Helper decreased because it is an inferior good.

b) The demand for Hamburger Helper increased because it is a normal good.

c) The demand for Hamburger Helper increased because it is an inferior good.

d) The supply of Hamburger Helper decreased because it is a normal good.

Wrong! - People are buying more Hamburger Helper as their real income in terms of food decreases. Is Hamburger Helper a normal good or an inferior good?

Correct! - An inferior good is a good for which demand increases as income decreases. Real income decreased and sales of Hamburger Helper increased, so the demand for Hamburger Helper increased and Hamburger Helper is an inferior good.

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