Dietary Incentives

by Elaine Schwartz    •    Nov 27, 2010    •    647 Views

Which would you choose?

2000 calories from 10 donuts that would cost you $5?


2000 calories from Greek yogurt, organic raspberries, a turkey avocado wrap, Alaskan King Salmon, green beans, a whole wheat roll, strawberries and heavy cream for $25.86?

Marketplace.org presented the $5/$25.86 comparison to show us that healthy food is expensive. Predictable? Yes. Then though, they told us something we would not have expected. This takes us to a recent academic study.

University of Buffalo researchers discovered that when healthy food became cheaper, consumers used their savings to buy less expensive less healthy food. As a result, the overall nutritional value of their diet remained the same. However, when Ritz Bits Peanut Butter Sandwich Crackers, for example, became more expensive by 12.5% to 25%, consumers stopped buying them. Then, with their savings, they purchased healthier alternatives, like bananas.

The implications for public policy? Tax junk food if you want people’s diets to improve.

The Economic lesson

But isn’t it even more complicated? Aren’t we talking about targeting the elastic region of many different consumers’ demand curves? The elastic region is where price rises and total expenditures (TE) drop.

You might want to look back at the soda tax debate.


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