How do people deal with higher food and fuel prices? Here are some possibly interesting lessons on the price elasticity of demand from a recent Zogby poll:
Lesson 1: The demand for food is highly inelastic because there are no substitutes--other than withering away.
...only about 8 percent of the 1076 respondents in the national poll said they were eating less generally to cope with rising food prices, the poll said.
Lesson 2: The demand for gas is inelastic, but not as inelastic as the demand for food, because there are a few (uncomfortable) ways to adapt.
Nearly half of respondents to a Reuters/Zogby poll of likely voters in the presidential election later this year said they are driving less to compensate for record U.S. gasoline prices, which hit a record average of $3.80 per gallon on Tuesday according to travel club AAA..."People have more control over gasoline. They are driving less* and driving smarter," pollster John Zogby said by telephone.
Lesson 3: The demand for specific types of food (that is, more expensive foods) is more elastic than the demand for food in general. When prices rise, people will substitute cheaper foods for more expensive foods.
To cope with rising food prices, people are changing their habits but still eating about the same amount. Nearly 15 percent of respondents said they are eating less expensive foods. About the same amount said they are using coupons to cut costs. Nearly 33 percent said they are absorbing higher food costs without any changes to their lives...
Lesson 4: Walmart may provide complementary ways to adapt to high fuel and high food prices.
One result of both higher gasoline and food costs may be a rise in the future to more big box retailers like WalMart Stores Inc, which could offer consumers cheaper prices that they would burn less fuel to get to.
*Drive Less! is catching on!
