Thanksgiving means more demand for turkeys. And yet supermarkets discount the price. Why?
First some turkey facts. This year, the American Farm Bureau says that the price of a typical turkey is up 22% from last year. According to Slate, the price of the typical supermarket frozen turkey has been increasing since the 2007 recession began.
One culprit is corn. As this turkey farmer said, “Any time corn prices jump, our costs go up a lot.” Revenue may be record setting but not profits.
But still, knowing the once a year turkey buyer is price-sensitive, your local supermarket will probably charge 10% less than its October price. Similarly, during Lent, food stores discount tuna. And people pay less for beer during the 4th of July weekend.
Finally, priced from $75 to $100 and more, here is a turkey for which buyers are not price sensitive.
The Economic Lesson
Knowing that the Thanksgiving turkey customer is price sensitive, food stores charge less. But, they make their money on relatively expensive complementary goods like sweet potatoes and cranberries and cream of mushroom soup.
Looking at a graph, you would see the demand for turkeys rise. As a result, the demand curve for a complement would also shift to the right.
An Economic Question: On a supply and demand graph, how would you illustrate the increase in typical Thanksgiving supermarket turkey prices?
Posted by: adminEcon
Tags: corn, demand, supply, Thanksgiving, turkey
In 1623, two years after the first Thanksgiving, Governor William Bradford was worried about Plymouth’s food supply. The problem, he concluded, was that people shared whatever they produced. Because “able and fit” young men were expected to work harder and then give their food to others, all worked less.
As Bradford explained it in Of Plymouth Plantation,”So they began to think how they…could…obtain a better crop than they had done…At length…the Governor…so assigned to every family a parcel of land…This had very good results for it made all hands very industrious…”
You can see what happened. When people could keep what they produced, they became more industrious.
The Economic Lesson
Equality or efficiency was a dilemma in 1623 and remains a dilemma today. The basic question involves how much of what we produce should we keep?
Maybe, especially on Thanksgiving, we can say it all takes us back to the size of the pie.