The Impact of Food Prices on Consumption: A Systematic Review of Research on the Price Elasticity of Demand for Food

This article discussed how the increasing problem of chronic diseases caused by diet-related issues has driven researchers to find different ways to improve peoples’ diets. They decided that one way to combat the issue is to change the prices of selected foods through a designed tax or subsidy policies. The researchers figured that lowering the price of healthier foods and raising the price of less healthy alternatives would change purchases toward the healthier options. Also, something such as adding a tax on certain products like sugar-sweetened beverages would turn people toward other, healthier beverage choices.

The researchers acquired all the studies conducted in the United States regarding food price elasticity of demand and combined the estimates into average price elasticities for sixteen food and beverage groups to figure out the food demand and consumption over the past seventy years. They focused on differences in price effects across income levels.

The price elasticity of demand is the percentage change in purchased quantity or demand with a change in price. It is determined by factors such as the availability of products, a persons’ income, and preferences. Price elasticities are more likely to be higher when the goods are luxuries, when there are substitutes for a good, and when consumers have more time to alter their behavior. Elasticities are lower for products that are necessary or goods with few substitutes. When the change in purchased quantity is below the change in price, this means the demand is inelastic and below 1.0. When changes in demand are above the price change, it means it is an elastic demand and is above 1.0.

The study resulted in all the mean price elasticities being inelastic ranging from .27 to .81. When income or prices changed, soft drinks, juice, meats, fruit, and cereal were relatively less inelastic and eggs, sweets, cheese, and fats were the most inelastic. Food away from home was the most responsive to changes and more elastic than the demand for food at home. Higher elasticity suggests a greater change in demand as prices shift.

This article really illustrated the effect of changes in the price of products on the elasticity of demand for that product. It included many factors that can account for changes in elasticity such as raising prices and changing incomes. I felt that this article related really well to what we learned in class about this topic.

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