| Year | Average Annual Household Income (£) | Index of Demand for Luxury Organic Meal Kits | Index of Demand for Discount Canned Goods |
|---|---|---|---|
| 2018 | 29,000 | 100 | 100 |
| 2019 | 30,200 | 108 | 98 |
| 2020 | 28,500 | 92 | 112 |
| 2021 | 29,100 | 98 | 105 |
| 2022 | 31,500 | 120 | 88 |
| 2023 | 32,800 | 135 | 80 |
| 2024 | 34,000 | 148 | 72 |
During the economic recovery phase up to 2024, shifts in household disposable income strongly altered purchasing patterns in the food and beverage industry. With rising real wages, consumer preferences transitioned rapidly toward convenience, health, and sustainability. Luxury organic meal-prep kits, which were once considered niche, saw a dramatic surge in household adoption.
The income elasticity of demand for these luxury organic meal kits is strongly positive, highlighting their nature as normal, luxury goods. In contrast, staple discount lines—such as canned vegetables and store-brand basic noodles—experienced falling volumes as household earnings increased, confirming their status as inferior goods.
While some supermarkets attempted to cut prices on premium organic ranges to capture more market share, the primary driver of demand remained the growth in disposable household income rather than changes in price.
Question
Define the term 'income elasticity of demand' (Extract B, line 6).
