The Key Concepts in Economics |
Dairy Elasticity |
Professor Bernadette WestBy Devon HassanJune 6th, 2016 |
In an ever emerging health conscious consumer we have seen a shift between inelasticity and elasticity in our dairy consumption. We take a look at why dairy has shifted away from inelasticity recently and why the United States government is no longer the top dairy consumer. As well as what impact this has on the fast food and restaurant business. Lastly we will look at what role organic and GMO free products have had in this shift recently.
Dairy consumption was once thought of being relatively inelastic. Meaning that demand for products such as milk, cheese, and butter ...view middle of the document...
Today that is not the case as the government is no longer one of our best customers.”
Today some of the biggest consumers of dairy in the nation are companies such as McDonalds, Burger King, Taco Bell and Domino’s Pizza. Domino’s Pizza partnered with the USDA to help revitalize the dairy industry as well as Domino’s own declining profits. Together they came up with a line of specialty pizzas that used up to 40% more cheese on their pizza. They also had assistance with creating and marketing a program called Domino’s Smart Slice. This is a kid approved pizza made with 100% mozzarella cheese and distributed to school aged children nationwide. These companies are reactive to rising prices however. If we see a rise in the price of processed cheese you may see place like McDonald’s switch from a double cheeseburger to a single cheese burger. Thusly, if the rise in products such as milk and shredded cheese increase Domino’s and Pizza Hut may cut advertising as well has how much employee labor to help compensate for the increase. While all these changes seem very small it has the ability to oversupplied market. Couple that with consumers buying less and demand starts to eases back.
Over the span of more than a dozen years we have seen the rise in organic and GMO free dairy products. Consumers are starting to care more about where their dairy comes from and how it is made. These alternative choices are what used to make more inelastic. With the continued rise in price for organic milk we are starting to see consumers going back to conventional milk. One of the major factor in the rise of organic dairy products in relation to price is USDA regulations in how the product has to be made to deem it to be organic. The farmers have to have several factors in place such as bovines that are not given antibiotics and they have to be allowed to grave in an...