A Replication of “The impact of food prices on consumption: a systematic review of research on the price elasticity of demand for food ” by Tatiana Andreyeva , Micahel W. Long and Kelly D. Brownell.
Vera Nam 173052008
GIRNE AMERICAN UNIVERSITY
FACULTY OF BUSINESS AND ECONOMICS
ECON500: Economics for Business Management
SPRING 2017 – 2018
Nowadays the consumption of unhealthy food is highly increasing , the main reason is the expensive prices for healthy and clean products , plus nowadays people have busy schedules and it’s easier to buy fast foods in order to safe time. Consumption of junk food leads to increasing load of diet-related unremitting diseases. The diet-related problems motivate researchers to discover broad-based approaches for improving diets.
The paper “The impact of food prices on consumption: a systematic review of research on the price elasticity of demand for food ” by Tatiana Andreyeva, Michael W. Long, and Kelly D. Brownell, was aimed to improve diets by shifting food prices. The importance of this research paper is to understand how changes in price influence the demand for various provisions.
Authors analyzed 160 studies on the price elasticity of demand for main foodstuff categories to evaluate mean elasticity by variations in estimates. According to this analysis the food which is more responsive to price changes is the food away from home . It includes such products like : meats, juice and soft drinks.
According to the study , one of the ways to solve this problem is to alter the relative prices of chosen foods through cautiously designed tax or subsidy policies. The potential change in prices will affect quality of dietary and obesity , especially for young generation and people with low income.
There are a lot of examples of how change in price have an effect on the consumption of a products. For instance cigarettes : countries make higher tobacco taxes to increase cigarette prices, in order to reduce cigarette consumption. The regulation of taxes shows how the change in prices influence consumer behaviour and eventually the public health.
Determinants of the Demand
The main factors determining the structure and level of demand are the revenue of buyers and prices in the marketplace. To understand the influence of these factors on purchasing demand, measuring the elasticity of supply and demand (their reaction to changes in social and economic conditions in the marketplace), a variety of factor models are used in economic science and practice, generally on the basis of correlation regression analysis or groupings. However, the empirical coefficients of elasticity obtained on the basis of single-factor models are imperfect. Therefore, different approaches for studying the elasticity of demand and consumption on the basis of multi factorial models are used. This models characterize the level of profitability and the price factor as a whole .
Consumer demand is the main factor of the country’s economic growth. The consumer demand is directly affected by the potential of the domestic commodity market. One of the largest segments of the market is a segment of consumer products.
The income of the population is usually related to demand by direct dependence , which means the richer the population , the greater the demand. Increase in money income will shift budget line to the right upwards. A similar result can be achieved by reducing the prices of both products , which also means an increase in real income.
The elasticity of demand for the price is determined by a lot of factors such as : consumer preferences, availability of substitutes , and expected duration of price change. For example: the increasing number of substitute goods that satisfy a common need available on the market lead to the higher elasticity. Goods that do not have substitutes (for example, insulin) are inelastic.
An important factor of understanding the determinants of demand is to differentiate among uncompensated and income-compensated price elasticity of demand. Also the construction of cross-price elasticity is significant from a policy viewpoint , because relative shifts in prices through taxation or subsidies may have an effect on demand for other products not regulated by policies.
Assessment of price elasticity of demand is a useful factor in the development of a tariff scale for taxes on goods and services. Calculations of price elasticity allow politicians to differentiate between inelastic and elastic goods. Such calculations are also useful in forecasting demand as a result of price changes and in adopting proposals for the reform of taxes on goods and services that can increase revenue collection and minimize the impact of social policies.
Analysis and Results
Analysis was used in this study in order to investigate if the price elasticity evaluations revealed in the literature are numerically relatively equal and if not, to describe the deviation in the elasticities , so that one may be able to build some conclusions. In view of the fact that the aim of the study was a correlative reassessment of previous researched regarding the subject of the paper : 160 studies were collected , where the price elasticity for food products were evaluated.
The variables assessed were food product, data characteristics , estimates of price for all foods and estimates of cross-price elasticity for main substitutes and complementary foods. The major estimate in this research was how the change in price for soft drinks can alter their consumption.
Different analytic approaches for modelling food demand were compared. During the analysis , 16 food and beverage categories were used, including ( cereal , beef , dairy products , eggs , food from outside , fruit , juice , soft drinks , sweets and vegetables).
The descriptive statistical analysis of 16 food and beverages groups showed that results are reliable with customary characterizations of the demand response to food prices as inelastic. All mean price elasticity estimates were below 1.0 and vary from 0.27 to 0.81. The relatively less inelastic products were soft drinks ( 0.79) and meats (0.75). Food outside the home was most responsive to price changes ( 0.81).
This data help link the public health and economics communities. Another benefit is that such data will lead to beginning of establishing a vision of where the change in price might have a supreme impact on customer food choices and physical condition. However despite having enough published articles there are still gaps in research base. These gaps must be filled , in order to achieve a complete understanding of political influence on a public health . According to the study there is evidence which propose that low-income populations are more sensitive to price changes than the largely population.
The main factors affecting individual dietary choices are taste , cost and nutritional value of products. The problem of obesity is connected to extreme consumption of added sugar and fat. Because of the low cost those products are more popular. Therefore the price of food and marketing practices are an important component of the eating environment. The strategies of price reduction encourage the alternative of targeted foods by declining their price relative to alternative foodstuff choices.
Healthy lifestyle nowadays in demand all over the world: the amount of people who care for their own body rapidly increase. Healthy products are more expensive than conventional packaged one , because of increased demand and more complex technological process of production are, but this doesn’t stand on the way of their sales. In 2017, sales reached an impressive $ 749 billion, representing 34% of the total sales of packaged food products around the world.
Economic problems , such as diminishing of income or dramatic increases in food prices might lead to changes in consumer behaviour. It is significant to understand such effect of economic conditions on diet quality , especially in low-income groups. The main dilemma is that the factors like increasing food prices and reduction in income create pressure to consume the foods lowest in cost , which is also lowest in quality, therefore lowest price makes calorie-dense foods more attractive.
It is important to mention that future research in this field should focus on predicting the impact of specific public health policies aimed at improving diets and reducing the burden of chronic disease.
The results obtained in this study can also be useful for specialists studying issues related to trade (import), customs, health, subsidies and social security issues. However, in this article , it is hard to consider demand elasticity and income elasticity , which is also vital for any analysis of food consumption, and therefore further research in this way can provide useful and imperative information. It is important to mention , that future research in this field should focus on predicting the impact of specific public health policies aimed at improving diets and reducing the burden of chronic disease.