Beer and pretzels.

Beer: An Economic Indicator

by Elaine Schwartz    •    Jun 6, 2011    •    1852 Views

There appears to be a correlation between beer drinking and economic growth…up to a point. According to a paper from the American Association of Wine Economists (yes, really) the connection is an upside down “U.” As individual incomes increase up to $22,000, so too does beer consumption. Then, though, beer drinking drops.

Specific examples? Between 1985 and 2007, China’s total beer consumption skyrocketed. For Russia, beer consumption starting rising in 1997. The AAWE paper indicates that in many emerging economies, beer consumption is up.

Broader implications? Perhaps, this is not a beer story at all. Instead, we are considering the impact of higher income, increasing world trade, and economic liberalization on what we consume.

In addition to the AAWE paper you might want to look at this NY Times blog and this Reuters blog.

The Economic Lesson

The AAWE paper refers to the “determinants of demand” for beer. Thinking of demand/supply graphs, the demand curve will shift when a determinant changes. So, for beer, as for all other commodities, the determinants relate to substitutes and complementary products, consumers’ income, utility and the number of consumers.

An Economic Question: For beer specifically, what might shift its demand curve?

One Response to Beer: An Economic Indicator

  1. Anonymous says:

    The demand curve for beer would shift to the left if a substitute product, such as wine, became less expensive. For example, if the price of grapes decreased, this would cause beer’s demand curve to shift to the left. Conversely, if the price of wine/grapes went up, beer’s demand curve would shift to the right — a reverse example of how substitutes act as demand determinants.

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