For the past two months, food costs have been increasing and the grocery store sticker prices are starting to rise. Beef, pork, and poultry (the most commonly consumed meats) as well as eggs and dairy all have increasing prices. And, we’re still waiting to see just how much the California drought will affect fruit and vegetable prices this season, but predictions are that prices will increase.
via www.mnn.com
Let's see. If all food prices rise simultaneously (and rise relatively faster than all other goods), the quantity demanded of food should fall (albeit not very much because the demand for 'food' is relatively inelastic). This seems like a good time to mention obesity.
If the price of only some foods are rising, relative to other types of food, then the quantity demanded of the higher priced foods will fall, but the demand for substitute foods will increase; causing higher prices for the substitutes and higher quantities demanded for the substitutes. So the question becomes, what are the substitutes for beef, pork and poultry?
I'm guessing it's Doritos.
