10 years: Macro Economist
In this video, Larissa Marioni discusses the concept of price elasticity of food and drinks and explains why we need to understand different elasticities of demand. She also provides detail around the hypothesis of the research and the findings.
In this video, Larissa Marioni discusses the concept of price elasticity of food and drinks and explains why we need to understand different elasticities of demand. She also provides detail around the hypothesis of the research and the findings.
In the ever changing macroeconomic environment, it is always important to understand the drivers of prices of different food and drink items, as they affect our consumption habits and thereby our long-term health. It is even more crucial to understand what this means in today’s world with rising costs of living as food inflation can have detrimental effects on low and middle-income households.
Key learning objectives:
Understand why we need to estimate different elasticities of demand
Understand what each of the demand side definitions means
Outline the findings of the research and its implications
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Estimating the price elasticity of demand for an individual item of food or drink allows us to assess how demand for it varies when its price changes (own-price elasticity). Estimating a demand system for all food items allows us to assess how demand for various items changes, not just in response to their own prices but also in response to changes in prices of other items (cross-price elasticity). Expenditure elasticity measures how demand for individual food items varies with changes in consumers’ overall expenditure on food, as consumers on low income might have different patterns from those on high incomes. Nutrient elasticities are also calculated. As changes in prices or income lead consumers to adjust their pattern of consumption, those adjustments affect nutritional intake.
Demand elasticity estimates enable policy-makers to anticipate the likely effect of food price inflation on patterns of consumption and nutrition. Sharp price may lead consumers to switch to cheaper and unhealthier products leading to decline in long term health. INSeveral government policies have recently looked to alter peoples’ eating behaviour in the last decade.
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