MBAF504 Economics | Pattern of Food Consumption in the United States

Your essay is evaluated based on the content, originality and substance in connection to the economic theories you learnt in this course.

The general content and flow of the paper should follow:

1. Introduction
2. Summary and critique of the paper- Economic analysis.
3. Comments on how the article relates to other work on the same subjec

Answer:

Introduction

In order to address different health issues arising from unhealthy food habits much concern is given on design of suitable health care policies. The traditional policies to improve dietary habit is to tax unhealthy foods and subsidizing healthy foods. Both the policies works through the price channel. The imposed tax raises price of the concerned good while the given subsidy reduces price of the good (Harding & Lovenheim, 2017). Price elasticity of demand plays a crucial role in determining success of these policies. The current paper attempts to make a critical review of one article in this field as developed by Tatiana Andreyeva, Michael W. Long and Kelly D. Brownell.

Article summary and critical review: An economic analysis 

The paper reviewed how demand of various food varies along with price. The particular focus has been given on major foods belonging to American Food category as per Dietary Guidelines. The Authors made an extensive research on published studies regarding demand elasticity with respect to price in US and combined these studies to make an average estimate of price elasticity. The paper presents a complete summary regarding the pattern of food consumption in the United States for the last 7 decades. The results show that average elasticity of all category is below 1.0 percent having a range of 0.27 to 0.81. Soft drinks, cereals, fruits, meats and juice with eggs having most inelastic demand. Relatively lower elasticity is obtained for cheese, sweets and sugars, oils and fats. Food away from home has a higher elasticity as compared to others in the chosen group (Andreyeva, Long & Brownell, 2010). The paper finds that after meat, the most studied category of food item is milk. There are differences in elasticity estimates for various category of milk based on the fat content. The implication of a higher price elasticity is that a small change in price lead to a much larger change in demand. For this price sensitive items policies related to taxing or subsiding relevant food product might be an effective policy.

The paper has made a summary analysis of previous research papers to understand the food consumption and pattern of demand. Based upon the selected final conclusion has been drawn regarding the measured elasticity of selected categories of food. In this sense, there is no added contribution of this paper in this widely discussed field of research. The paper fails to address how demand elasticity varies across different income groups. Income is a significant determinant of price elasticity and consumption pattern. Impact of policies that increases food prices differ between high and low income households. When price increase, then poor people have a tendency to switch consumption to low quality cheaper alternative. This might increases consumption of unhealthy food which adversely affect heath condition (Aguiar & Bils, 2015). However, there is not much research on this field and hence, the paper concludes nothing about income effect in determination of price elasticity.

Relevant studies in this field 

There are several past literatures trying to find out the impact of a change in price on consumption pattern. Researches based on both laboratory and in an intervention set up confirmed that policies that lowers prices of health food products and raises price of unhealthy foods helps to shifts consumption towards healthy diet (Hursh & Roma, 2016). Studies found how a relative change in price affects the quality of diet and obesity especially young people, low income household and those who are most vulnerable to obesity. Studies based on implication of tobacco taxes undermine influencing power of price on purchasing behavior and public health. Consumer demand depends on several factors. In some studies, product quality, preferences, advertising and different other shift variables in the estimation demand elasticity (Niebylski et al., 2015). The reviewed article cumulatively studies these literatures and provides an average elasticity estimate.

Economic theories of price elasticity 

Concept of price elasticity of demand refers to the percentage change in demanded quantity of a good for a unit percentage change in price. There are different factors that influence price elasticity of a particular item. These are number of available substitute, preference of consumers, time period, share of income of income spent on the particular good and others (Hill & Schiller, 2015). The nature of elasticity is subject to the change in magnitude of demand in response to price. If the relative change in the purchased quantity is less than the corresponding change in price, then demand is considered as relatively inelastic. Price elasticity measure in this case is less than 1. When demand constitute a less proportionate change compared to price change then demand is considered as relatively elastic. Here, measured elasticity exceeds 1. The paper reviewed food price elasticity for primary demand for food (Cowen & Tabarrok, 2015). Primary demand reflects consumer demand of a category or particular group of items. A different price elasticity measures is obtained for different goods.

Conclusion 

The article presents a brief summary of price elasticity of demand of a chosen major category of food in the United States. Measured elasticity varies in the range 0.27 to 0.81. All the items though have inelastic demand however there are some products that have a higher elasticity as compared to others. Food away from home has a much larger elasticity than others. Egg, cheese and sweets have lowest elasticity. The paper does not capture variation in elasticity depending upon income. Elasticity variation among income groups affects particular health policy and this leaves the paper to some areas to criticism.

References list 

Aguiar, M., & Bils, M. (2015). Has consumption inequality mirrored income inequality?. American Economic Review, 105(9), 2725-56.

Andreyeva, T., Long, M. W., & Brownell, K. D. (2010). The impact of food prices on consumption: a systematic review of research on the price elasticity of demand for food. American journal of public health, 100(2), 216-222.

Cowen, T., & Tabarrok, A. (2015). Modern principles of microeconomics. Macmillan International Higher Education.

Harding, M., & Lovenheim, M. (2017). The effect of prices on nutrition: comparing the impact of product-and nutrient-specific taxes. Journal of health economics, 53, 53-71.

Hill, C., & Schiller, B. (2015). The Micro Economy Today. McGraw-Hill Higher Education.

Hursh, S. R., & Roma, P. G. (2016). Behavioral economics and the analysis of consumption and choice. Managerial and Decision Economics, 37(4-5), 224-238.

Niebylski, M. L., Redburn, K. A., Duhaney, T., & Campbell, N. R. (2015). Healthy food subsidies and unhealthy food taxation: A systematic review of the evidence. Nutrition, 31(6), 787-795