The document discusses the income elasticity of demand for chocolates in India. It states that income elasticity of demand measures the relationship between changes in quantity demanded and changes in real income. For luxurious goods like chocolates, demand rises more than proportionately with increases in income. Specifically, the income elasticity of demand for chocolates in India is positive at 1.6, meaning that a 10% rise in income leads to a 16% increase in demand. Sales data shows that the volume and value of chocolate sales in India grew significantly between 2008 and 2011 as incomes rose.
3. 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
5. 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.
6. 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.
7. Yed = + 1.6: Good is a normal good and
elastic – a rise in incomes of 10% would
lead to demand rising by 16%
8. 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
9. • 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.
