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More Income, More Choices

After a particularly sumptuous dinner with a great choice of wines, my wife pointed out to me that there seem to be many more types of wine available now than when we were dating in the mid-1960s. She’s right-and it is partly a reflection of the growth of per-capita wine consumption in the U.S. But it is also a reflection of the positive income elasticity of demand for variety. As we get richer, we not only substitute toward higher-quality goods-we demand more diversity in what we consume and what we do, as Reuben Gronau and I showed in a fairly recent paper.
As another, less tasty example, the number of varieties of lettuce available today is amazing; when I was a kid, we got iceberg lettuce-there was nothing else.