WELCOME

INCOME ELASTICITY OF DEMAND FOR

CHOCOLATES IN INDIA

INCOME ELASTICITY OF DEMAND

• Income elasticity of demand (Yed) measures the relationship between a change in quantity demanded and a change in real income.

• Yed = % change in demand % change in income

There are 3 different types of Income Elastic Goods

NecessitiesComfortsLuxurious Goods

Luxurious Goods

• Luxurious goods are those whose demand rises more than the proprotionate change in income.

• The elasticity of demand for these goods is greater than one.

Income Elasticity of Demand for Chocolate

•Demand for chocolates has a positive income elasticity of demand.

•As the income rises the amount spent on chocolates also rises more than proportionate.

•Economic: Increasing per capita income resulting in higher disposable income.

Growing middle class/urban population – increase in demand.

Yed = + 1.6: Good is a normal good and elastic – a rise in incomes of 10% would lead to demand rising by 16%

Dark Truth

• Volume sales of chocolate in India grew 21% between 2008 and 2011

• Sales of chocolates increased from $418 million in 2008 to $857 million in 2011

• Premiumisation saw launches grow from 4% in 2008 to 6% in 2011

• Seasonal launches increased to 7% in 2011 vs 2% in 2008

• A recent report by UK based global market research firm Mintel indicates that India is one of the fastest growing markets for chocolate.

• As per the research, India has posted the largest increase in volume sales with 21 per cent growth between 2008 and 2011. While sales of chocolate have doubled between 2008 and 2011, volume has also significantly increased from 50,000 tonnes in 2008 to 88,000 tonnes in 2011.

PRESENTED BY:

LEKHASHREE B RMBAL4007