Andreyeva T., Long M., Brownell K. (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). 216-22.
PED stands for price elasticity of demand. It refers to the amount of change in purchasing that can be expected by a one percent change in the price of a product The article referenced above reviewed 160 studies across food categories and across decades to suggest certain mean values of price elasticity for 16 food categories. With regard to PED, there is inelasticity and elasticity - which refers to whether or not the change is above or below the number one when the product price is increased or decreased. In other words, lower numbers indicate that a product may not be effected by a price change (or the effect is small).
This systematic review, which has some limitations, showed very little difference in purchasing behavior regarding eggs, but some change when the cost of dining out and soft drinks went up. None of the food categories they studied provided values over one.
Interesting points from the study include that some persons will change behavior when the price of whole milk is increased and will switch to a healthier version, i.e. low fat milk, but did not switch to skim milk, the healthiest.
Because pricing of foods to promote wellness is on the minds of many in government and public health, the authors of this study made several suggestions. One is that the many factors regarding purchasing behavior be considered and that when price changes are implemented, several areas be assessed for possible ripple effects - good and bad.
For instance, would an increase in the cost of soda lead to a decrease in soda consumption but a switch to high calorie sports drinks? OR would it lead to consumption of low or no calorie beverages. Would the consumer switch categories - for example, if the whole milk price is too high would the person switch to OJ or soda, or make up the fat in a food product instead? Inversely, would the person who changed to low fat milk because of price decide to buy fruit instead of a snack cake because they are now thinking healthier.
The researchers noted that many of the foods that we are encouraged to eat, like fruits and veggies and whole grains, have barely been studied for price elasticity if at all. Would increasing white bread and rice prices lead to a switch to whole grains?
Several states already place higher taxes on soda and snacks, often unbeknowst to the public and simply to earn more revenue. If the prices are raised for the purpose of promoting health and changing behavior, Andreyeva et al suggest that the extra income be used to offset the prices of healthier items. I find that to be a grand idea!
The authors discuss the other factors that influence our purchasing decisions. Of note is how price changes occur within many contexts. For example - does the consumer expect this to be a permanent increase (think gasoline!) and has the consumer's income also changed. With regard to the current economic situation, which none of the studies evaluated pertained to, there is great concern that the amount of high calorie low nutrient foods that are purchased will increase because of the low cost.
This is interesting work, I enjoyed reading the article.
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